UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF
SECURITIES Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
BINGO.COM, INC.
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(Exact name of registrant as specified in its charter)
Florida Not Applicable
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
702-543 Granville Street
Vancouver, B.C. V6C 1X8
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (604) 687-2000
Securities to be registered under Section 12(b) of the Act:
NONE None
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Title of each class to be so registered Name of each exchange on which each
class is to be registered
Securities to be registered under Section 12(g) of the Act:
Common Shares, Par Value $.001 Per Share
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(Title of Class)
Not Applicable
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(Title of Class)
PAGE 1 OF _______ PAGES.
THE EXHIBIT INDEX APPEARS ON
SEQUENTIALLY NUMBERED PAGE _____.
TABLE OF CONTENTS
Item 1. Business...............................................................................................1
Item 2. Financial Information.................................................................................33
Item 3. Properties............................................................................................42
Item 4. Security Ownership of Certain Beneficial Owners and Management........................................42
Item 5. Directors and Executive Officers......................................................................43
Item 6. Executive Compensation................................................................................45
Item 7. Certain Relationships and Related Transactions........................................................46
Item 8. Legal Proceedings.....................................................................................47
Item 9. Market Price of and Dividends on Registrant's Common Equity and Related Stockholder Matters...........47
Item 10. Recent Sales of Unregistered Securities...............................................................47
Item 11. Descriptions of Registrant's Securities to be Registered..............................................49
Item 12. Indemnification of Directors and Officers.............................................................55
Item 13. Financial Statements and Supplementary Data...........................................................56
Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..................56
Item 15. Financial Statements and Exhibits.....................................................................56
PART I
Item 1. Business.
Introduction
We, Bingo.com, Inc., are a holding company with two subsidiaries:
o Bingo.com (Canada) Enterprises Inc. is a British Columbia corporation; and,
o Bingo.com (Antigua), Inc. is an Antigua Corporation
We intend to organize a wholly owned subsidiary under the name Bingo.com
(Wyoming), Inc. as a Wyoming corporation.
Our corporate structure after we form Bingo.com (Wyoming) will be as follows:
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Bingo.com, Inc.
(a Florida corporation)
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Bingo.com (Canada) Enterprises Inc.(1) Bingo.com (Antigua), Inc. (2) Bingo.com (Wyoming), Inc. (3)
(a British Columbia corporation) (an Antigua Corporation) (a Wyoming corporation)
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(1) Bingo.com (Canada) was incorporated in the Province of British
Columbia on February 10, 1998 as 559262 B.C. Ltd., which by
Certificate of Change of Name dated February 11, 1999 changed its name
to Bingo.com (Canada) Enterprises Inc.
(2) Bingo.com (Antigua) was incorporated under the laws of Antigua and
Barbuda on April 7, 1999 as Star Communications Ltd., which by
Certificate of Amendment dated April 21, 1999 changed its name to
Bingo.com. (Antigua), Inc.
(3) We intend to incorporate Bingo.com (Wyoming) in the State of Wyoming
on or about June 15, 1999. We intend to form Bingo.com (Wyoming) for
the purposes of restructuring our corporate organization.
Two of our subsidiaries intend to design, develop, operate, promote and
commercialize two Internet related businesses:
(1) Bingo.com (Canada) intends to develop and operate an Internet portal, which
will focus exclusively on the entertainment and lifestyle vertical market
sectors; and
(2) Bingo.com (Antigua) intends to develop and operate a bingo gaming web-site,
which will be offered on-line and which will be accessible worldwide over
the Internet (except in jurisdictions that prohibit Internet gaming). (3)
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Our Company - Bingo.com, Inc.
We were incorporated in the State of Florida on January 12, 1987 under the name
"Progressive General Lumber Corp." with an authorized share capital of 7,500
shares of common stock with $1.00 par value per share. We were for the most part
inactive until July 1998.
On July 17, 1998, we filed Articles of Amendment to amend our Articles of
Incorporation and increase our authorized share capital to 50,000,000 common
shares with a $0.001 par value per share. We also authorized a forward stock
split (or a stock dividend) to increase the number of then issued and
outstanding shares on a 200-for-1 basis.
In January 1999, our management changed, and we began to implement our current
business strategy. On January 13, 1999, we filed Articles of Amendment to amend
our Articles of Incorporation and change our name to "Bingo.com, Inc.",
effective January 22, 1999.
On January 18, 1999, we finalized an agreement to purchase the right to use the
domain name "Bingo.com".
We organized Bingo.com (Canada) in February 1999 and Bingo.com (Antigua) in
April 1999 to facilitate the implementation of our business plan.
The Reorganization
In June 1999, our Board of Directors unanimously approved, subject to the
approval of the holders of more than 50% of the outstanding shares of our common
stock, a corporate reorganization pursuant to which we will organize and merge
with and into a Wyoming subsidiary, and immediately thereafter, we plan to
obtain Articles of Continuance from the Director of International Business
Corporations, Antigua, to become an Antigua international business corporation
called "Bingo.com, Inc." After the consummation of the reorganization, we will
be an Antigua corporation, which will be the holding company of our
subsidiaries, and our subsidiaries will continue to conduct the businesses in
which they are now engaged.
We contemplate that the reorganization will be completed in two steps:
1. We will merge with and into our to be formed Wyoming subsidiary resulting in
the following corporate structure:
2
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Bingo.com (Wyoming), Inc. (1)
(a Wyoming corporation)
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Bingo.com (Canada) Enterprises Inc. Bingo.com. (Antigua), Inc.
(a British Columbia corporation) (an Antigua Corporation)
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(1) Bingo.com (Wyoming) will take our place as a holding company for
Bingo.com (Canada) and Bingo.com (Antigua). Your shares will become
shares of Bingo.com (Wyoming).
2. Bingo.com (Wyoming) will continue out of Wyoming into Antigua and become an
Antigua International Business Corporation resulting in the following
corporate structure:
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Bingo.com, Inc. (1)
(an Antigua International Business Corporation)
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Bingo.com (Canada) Enterprises Inc. Bingo.com. (Antigua), Inc.
(a British Columbia corporation) (an Antigua Corporation)
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(1) We, as Bingo.com (Wyoming), will file an Application for Certificate
of Transfer with the Secretary of State of the State of Wyoming and we
will become an Antigua International Business Corporation using our
current name, Bingo.com, Inc. Your shares will then become shares of
our newly continued Antigua corporation.
Your basic voting rights will not change as a result of the reorganization.
We intend to file a registration statement on Form S-4 with the SEC relating to
the registration of our Antigua shares to be issued in connection with the
reorganization. The reorganization will require the approval of a majority of
our shareholders.
Our common shares are currently quoted on the National Association of Securities
Dealers' Over-The-Counter Bulletin Board (also known as the "OTCBB") and trade
under the symbol "BIGG." We anticipate that the Antigua shares you receive in
connection with the reorganization will be quoted on the OTCBB under the "BIGG"
trading symbol. We cannot, however, assure you that we will continue to qualify
for quotation on the OTCBB or that the National Association of Securities
Dealers will approve our Antigua shares for OTCBB quotation or assign the BIGG
symbol to our Antigua shares after the reorganization.
We have not been subject to any bankruptcy, receivership or other similar
proceeding.
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Bingo.com Domain Name
We recently finalized an agreement to purchase the right to use the domain name
"Bingo.com" from Bingo, Inc. for (i) $200,000, (ii) 500,000 shares of our common
stock and (iii) an agreement to pay, on an ongoing basis, royalties in the
amount of 4% of our gross revenues with a total minimum guarantee of $1,100,000.
The Business of Bingo.com
Overview
We intend to develop, through our subsidiaries, leading positions as:
(1) a niche Internet portal focused on the worldwide entertainment and
lifestyle vertical markets; and
(2) a market leader in on-line bingo gaming.
We believe our subsidiaries will pioneer concepts based on the broad global
recognition of the word "bingo," the association and acceptance of the name
Bingo within our target markets and the global appeal of the game of bingo.
We believe this may provide our subsidiaries with a competitive market advantage
that will enable them to establish a superior market position and differentiate
their products and services from the larger or more established portals or web
sites whose product and service offerings are more generic and targeted to
broader markets.
Each of our subsidiaries is in the process of developing its respective segment
of our business - the entertainment and lifestyle portal and the bingo gaming
web-site.
The Business of Bingo.com (Canada) - Portal Site
Overview
Our primary objective through our Canadian subsidiary, Bingo.com (Canada), will
be to provide Internet users with an engaging vertical market focused portal
site that can be easily designated by the Internet user as their default home
page and that will be a unique gateway to the Internet's entertainment and
lifestyle web-sites. We anticipate that the portal will incorporate appealing
design and content characteristics, be user friendly in the sense that it will
be have a less technical/more more intuitive feel to it, and offer free
services, products, hot-links and prizes. Bingo.com (Canada)'s strategy is
intended to create a relationship of trust and loyalty between
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the portal and the user. We anticipate that Bingo.com (Canada) will develop a
measurable audience that will justify and permit it to generate revenues from
the sale of banner advertising and e-commerce. The unique requirements of
developing and operating a portal will require Bingo.com (Canada) to be managed
by its own management team and organization principally located in Vancouver,
Canada. The entertainment aspect of Bingo.com (Canada)'s portal will not include
adult content.
The Global Portal Market
The portal industry was started by Yahoo!, a search engine company that brought
organization to the chaos of the Web. It began as a simple classification or
index of Web sites and kept growing. As a result of the explosive popularity of
the Web and the Web surfer's demand for quick access to well-organized
information, many companies such as Excite, Infoseek and Lycos soon followed
Yahoo!'s lead. The search engine companies responded to the market demand for
better organization and increased service and have evolved into what are today
referred to as portals or content channels.
Today, a constant stream of traffic is directed to the portals and from there,
out into the Web. Web portals are targeted at both businesses and consumers and
typically contain a search engine. Portals offer a multitude of free services in
an attempt to capture the attention of passing traffic and encourage the
passersby to stay and use their services. All of this activity (such as, how
many users enter the site, how long they stay and where they go to within the
portal) is tracked by sophisticated software. When a site can state that it has
numerous hits or page views, it can generally attract advertisers and generate
revenues by selling advertising or virtual real estate space on its site, not
unlike billboards on a highway. Portal operators like America Online Inc.,
Excite Inc., and Yahoo! Inc., generate revenues by selling advertising space to
advertisers seeking to target the millions of people each day who visit these
portals as the starting point for daily surfing.
Vertical Market Focus
We believe the market for major portal companies that have launched sites with a
broad appeal is becoming crowded. These 'macro portals' are often viewed as
being cluttered and, although they seek to position themselves as being unique
from their competitors, there is little apparent brand differentiation between
them. Although comprehensive, we believe that these sites can be confusing to
the user as they present many more alternatives than the consumer wants to deal
with to solve their current need within the time constraints that they face. As
consumers are becoming more comfortable with using, interacting with and
transacting commerce over of the Internet and the Web, they are also looking for
more direct access to their specific areas of interest or need. This has lead to
the development of a new class of portal that focuses only on the content and
links that deal with the issues of specific vertical markets or categories of
interest.
Bingo.com (Canada)'s business strategy will be to create, develop and operate a
portal whose content and links are focused on entertainment and lifestyle
issues. Some examples of entertainment content could include movies, music,
videos, computer games, sports, or the
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performing arts. Lifestyle content might include health, travel, consumer
reports, retirement financial planning, environment, or cooking.
E-commerce
The term "e-commerce" encompasses business to consumer transactions conducted
over the Internet and the World Wide Web. As interest in the Web exploded during
the mid-1990's and, as the number of consumers with access to the Internet at
work or at home grew, companies that originally had established Web sites for
marketing purposes (to promote their corporate or brand identity or to provide
information about their products) soon became interested in using those sites
for sales purposes. Businesses identified the Internet as a means to shorten the
sales cycle. The information that is presented on a Web site is delivered in a
focused manner to targets who are intentionally looking for that specific
information. The Internet can reduce costs and level the playing field for small
and large businesses, allowing them to extend their reach globally. As well, the
availability of sophisticated Internet and Web technology, stronger security
mechanisms, and the increasing acceptance of the new communications medium are
fueling the use of e-commerce by businesses and consumers. We believe that
consumers' trust will increase with the number of successfully completed
transactions. Studies are demonstrating that the consumers' attitudes are
rapidly changing and that they are rapidly gaining confidence with transacting
business over the Internet.
We believe that the way in which products and services will be directly or
indirectly sold in the future will increasingly shift toward the Internet.
Leading businesses throughout the world are developing their Web strategies to
take advantage of this shift in the way consumers will receive product and
service related information, and purchase goods and services. We believe that an
increasing percentage of businesses advertising budgets will be allocated to the
funding their Web strategy. Bingo.com (Canada) believes advertisers are and will
increasingly be looking for portals that have the volume of users that match the
demographic and psychographic profile of their target consumer.
We anticipate that the breadth of Bingo.com (Canada)'s focus on entertainment
and lifestyle content will cross most demographic and psychographic consumer
profiles. As a result, we anticipate that Bingo.com (Canada) will be able to
sell banner advertising and enter into promotional joint ventures with a broad
spectrum of businesses.
Bingo.com (Canada) Marketing Strategy
Our goal is for Bingo.com (Canada)'s portal to become the default browser for
those seeking information with respect to entertainment and lifestyle issues.
Bingo.com (Canada) intends to build an Internet community that we anticipate
will support strong advertising revenues and e-commerce sales for Bingo.com
(Canada).
Consumers have a number of alternatives as to how to spend their disposable
income. In a general sense they can invest for the future or they can spend
their funds on entertainment or lifestyle activities. The Bingo.com (Canada)
portal will be directed to the user who wants to improve the quality of their
life through gaining information on or participating in entertainment
6
or lifestyle activities that they identify through the Internet. We believe
entertainment or lifestyle related searching is generally a pleasant experience.
As such, the core vertical markets that the Bingo.com portal will target are
areas that people instinctually consider non-threatening and fun. Through
advertising, Bingo.com (Canada) will attempt to create strong branding of its
recognizable logo, name and category. Many of the existing portals do not
incorporate unique design features capable of differentiating themselves from
the competition. Bingo.com (Canada)'s strategy will be to focus on unique design
that will incorporate Flash technology, with full motion, 3D graphics, music and
sound effects. We believe this is consistent with the entertainment focus of the
portal and the expectation of the user, and will add to the user's Internet
experience. Our goal is to capture the users initial and future attention in
order to create curiosity and loyalty. In addition, Bingo.com (Canada)'s portal
will be designed to be more user friendly and less technical in the eyes of the
user.
We anticipate the Bingo.com (Canada) portal will offer many services to its
visitors that will aid in establishing the desired loyalty and trust required to
create an "Internet community." We anticipate many of these services will be
available to the public free of charge and will include web pages, e-mail, news
and other entertainment features, all designed to maintain and enhance the
portal's appeal and brand and instill trust and build a relationship with the
visitors to its portal. We believe free promotions are one of the most
successful Internet marketing techniques.
Portal Revenue - Advertising
We believe the Internet is rewriting the rules within the advertising community.
The Internet is causing a major change in the way companies can reach their
desired customer base. Online advertising is creating a faster, more focused,
and dynamic method to reach customers who have personally selected their area of
interest. The global proliferation of computers in businesses and the home and
the increasing connectivity through the Internet has presented the advertising
community with a new medium through which to communicate their client's
messages. As rapidly evolving Internet technologies permit more interactions
between business and the consumer, the Internet is becoming an accepted medium
for advertising and e-commerce. As a result advertising will be focused at
specific target groups. In order to better understand the demographics and
psychographics of the site visitor, companies are asking customers to first
provide information about themselves. Thus, in addition to determining customer
needs based on their actual preferences, Web sites are an effective media to
poll customers quickly, precisely and cost-effectively. This allows the web-site
to make changes rapidly that will attract more target customers and generate
greater advertising revenue through customized advertising and promotions.
The key for the ad-based Internet business model (wherein the Internet is viewed
as an accepted mass media) is the ability of marketers to measure the Web
audience on a competitive basis with other media such as broadcasting, cable or
print. The new measurement criteria will focus on unique users, page views and
duration as being roughly comparable to the conventional existing criteria,
frequency and reach. Several existing and new companies have been founded to
provide this service.
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We anticipate that an integral component of the Bingo.com (Canada) portal will
be our ability to analyze on a statistical basis our user base profiles. The
Bingo.com (Canada) portal site currently tracks a number of monthly, daily and
hourly statistical criteria. We intend to use this information to justify the
advertising rate structure used by Bingo.com (Canada) and to market our portal
advertisers.
Bingo.com (Canada) Business Development and Startup Costs
As of May 15, 1999, Bingo.com (Canada) has expended approximately $156,250 on
portal research and development activities. Effective February 3, 1999,
Bingo.com and Stratford Internet Technologies ("Stratford") entered into an
agreement (the "Stratford Agreement") pursuant to which we retained Stratford to
assist in designing and to develop the first phase of the portal site. Pursuant
to the terms of the Stratford Agreement, Stratford has assigned to us all right,
title and interest in the portal site. Pursuant to the Stratford Agreement, we
made payments of $15,000 and have allotted and agreed to issue Stratford
two-hundred and fifty thousand (250,000) shares of our common stock as payment
for the services rendered to assist in designing and to develop first phase of
the portal site. The parties are in the process of amending the terms of the
Stratford Agreement.
Bingo.com (Canada) Employees
As of May 31, 1999, Bingo.com (Canada) had five full-time employees or
consultants and two part-time employees. From time to time, Bingo.com (Canada)
may also retain consultants and consulting firms to provide Bingo.com (Canada)
with special expertise in developing marketing, software and telecommunications
technologies.
Bingo.com (Canada) Competition
Bingo.com (Canada) will face competition primarily from established North
American based branded portals such as Yahoo, AOL, AltaVista, Excite, Hotbot,
Infoseek, Lycos, MSN, Netscape and others. There are also a number of smaller
companies that target the entertainment segment of the market and a number of
companies that may be in the process of developing Internet portals that may
directly compete with the Bingo.com (Canada) portal.
Portals are well established and compete fiercely for market share based on
offering a continually increasing number of free features and content. The free
features, such as personalization tools, e-mail, stock updates, tailored news
headlines and news services, message boards, chat areas, enhanced reference and
search tools, and shopping guides are intended to instill trust and establish a
bond between the portal and the surfer.
The convergence of multimedia communications (voice, data, video, Web) and the
constantly increasing capability of technologies to deliver these media will
permit increasing interactivity and allow for more media rich content to be
delivered over the Web. This is the driving force behind the joint ventures or
acquisitions of portals with branded media companies such as Time Warner, Walt
Disney Co. or AT&T, or industry consolidation as was the case with America
8
Online's buyout of Netscape Communications or Yahoo!'s acquisition of GeoCities.
These portals are well financed and the strength of the combined entities will
further enhance their ability to attract the considerable amounts of capital
that will be required to keep pace with the market demand and technology
advances.
Bingo.com (Canada) Trademarks
We anticipate Bingo.com (Canada) will apply for trademark registration and
protection for its logo and various phrases in Canada and the United States.
However, Bingo.com (Canada) has not submitted any applications for trademark
registration. In the event that Bingo.com (Canada) determines that it has
created an asset whose value can be protected it will attempt to protect its
proprietary asset by applying for patents, copyrights or trademarks. In
addition, Bingo.com (Canada) will endeavor to rely on trade secret laws and
non-disclosure and confidentiality agreements with its employees and consultants
who have access to its proprietary technology.
The Business of Bingo.com (Antigua) - Bingo Gaming
Overview
Our Antigua subsidiary's primary objective is intended to be the development and
management of one of the largest on-line bingo games in the world. We anticipate
that Bingo.com (Antigua)'s bingo game will incorporate dynamic design features,
surprise jackpots and prizes, chat rooms and a jackpot of up to $1,000,000. We
also anticipate that Bingo.com (Antigua) will contribute 1% of its gross
revenues from the sale of bingo cards to charity. Bingo.com (Antigua)'s strategy
will be to create a comfortable environment, which players will return to on a
regular basis to play virtual bingo. The unique requirements of developing and
operating an Internet based gaming site will require the operations of Bingo.com
(Antigua) to be directed by a Board of Directors separate from our Board of
Directors and to be managed by a separate experienced management team and
organization located in Antigua.
Bingo.com (Antigua) - Licensing
In March 1999, Bingo.com (Antigua) applied to the Antigua and Barbuda Free Trade
and Processing Zone for a license to operate an offshore virtual casino wagering
business. On April 16, 1999, the license was granted to Bingo.com (Antigua) to
operate an Offshore Virtual Casino Wagering business in Antigua. The license was
granted under the authority and jurisdiction of the Antigua and Barbuda Free
Trade and Processing Zone in accordance with Statutory Instruments 1997 No.
20-Virtual Casino Wagering and Sports Book Wagering Regulations, made by the
Minister under Section 27 of the Free Trade and Processing Zone Act No. 12 of
1994. The license permits Bingo.com (Antigua) to conduct operations, subject to
Bingo.com (Antigua) commencing operations within 3 months of the date of payment
of the License Fee of $100,000, which was made to and accepted by the Antigua
and Barbuda Free Trade and Processing Zone on April 16, 1999. An annual payment
of $100,000 is required to be paid in order to continue operations under the
terms of the license.
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On-line Bingo Gaming Software
Bingo.com (Antigua)'s proprietary software is anticipated to allow patrons to
play a variety of bingo games over the Internet in two modes: (1) wagering mode,
and (2) free mode.
The on-line bingo game developed by Bingo.com (Antigua) is designed to be
entertaining and captivating. Bingo.com anticipates that it will adapt the
on-line bingo game to the idiosyncrasies of the Internet to minimize the risks
associated with "noise" on telephone lines or other unpredictable technical
glitches that may cause connections between the player's computer and the
Antigua based on-line bingo game server to terminate. The software is
anticipated to keep track of the precise status of the game. If a game is
interrupted, the patron needs only to return to the Bingo.com (Antigua) web-site
in order to determine the status or outcome of the game they were playing.
Bingo.com (Antigua) began beta testing its proprietary gaming software and
server in April 1999 and continued beta testing through June 1999. The server
systems and software have performed well in test mode and we believe the
software will be ready for commercial use after we complete testing and debug
any remaining software problems. Bingo.com (Antigua) anticipates that during the
duration of the beta test period, players will provide Bingo.com (Antigua) with
valuable comments and feedback, which can be incorporated by Bingo.com (Antigua)
into the improvement of its software and product offerings.
Bingo.com (Antigua) Equipment Capacity
Bingo.com (Antigua) owns a primary server and a backup server. The primary
server is located in a secure third party Antigua based facility. It is
anticipated that Bingo.com (Antigua) will install the back up server in a secure
third party Antigua based facility in June 1999. We believe the server is
capable of handling 20,000 simultaneous connections (users). The backup server
is intended to provide Bingo.com (Antigua) with the capacity required to operate
in the event the primary server's operation is temporarily interrupted.
Bingo.com (Antigua) Operations
Our on-line bingo game will be accessible to players over the Internet (also
known as the World Wide Web). As the name `World Wide Web' suggests, people
located throughout the world who have a computer and access to the WWW will be
able to play our on-line bingo game. Internet based commerce, including on-line
wagering, is a relatively new industry that transcends the concept of
traditional state and national borders. Many countries and jurisdictions are
currently struggling to determine how to deal with issues related to Internet
commerce, and more specifically, whether to prohibit, regulate or tax the
transactions that flow over the WWW.
Bingo.com (Antigua) has been granted a license from the Antigua and Barbuda Free
Trade Processing Zone to operate its on-line bingo game. However, the laws of
certain jurisdictions, including Canada and the United States, either directly
do not permit or are indirectly being interpreted as not permitting on-line
wagering. The management of Bingo.com (Antigua) is in
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the process of identifying and reviewing legal issues related to on-line
wagering in certain jurisdictions and is in the process of considering different
strategies for complying with the laws of each jurisdiction where the on-line
bingo game may be played. One of these strategies would include blocking access
to the wagering mode with respect to residents of jurisdictions where the
legality of gaming is uncertain, including the United States and Canada, by (i)
screening applicant and (ii) blocking credit card transactions. Bingo.com
(Antigua) intends to "go live" with its on-line bingo game in June 1999, and we
believe by then Bingo.com (Antigua)'s management will have defined its policy
with respect to accessibility to the wagering mode.
In the event that Bingo.com (Antigua)'s management decides to implement a
blocking strategy, we anticipate that they will publish on the on-line bingo
game web-site a legal notice that notifies the players of its policies and the
player's responsibility with respect to the laws of the jurisdiction within
which they are resident. The following is an example of the legal notice that
may be publish on the on-line bingo game web site is:
Only those individuals over the legal age under the laws of their
jurisdiction are allowed to play for real money at the Bingo.com on-line
bingo game web site. If you are playing for real money, be aware that
authorities in some jurisdictions do not currently permit gambling over the
Internet. Before playing you should appraise yourself of which laws are
applicable to you and act in accordance with those laws. You should verify
that you are in compliance with the laws applicable to you in your
jurisdiction before registering. We reserve the right to cancel the
privileges of anyone playing our on-line bingo game for real money that is
found to be violating the law.
We intend to comply with the laws of those jurisdictions that either directly do
not permit or are indirectly being interpreted as not permitting on-line
wagering and to notify the players of their responsibilities. However, we cannot
guarantee that players will not find methods of disguising the identity of their
residence, which would allow them to wager on our on-line bingo games.
Any player will be able to play the on-line bingo game in the free mode.
We anticipate Bingo.com (Antigua) will operate its on-line bingo game according
to the following guidelines:
o accept several forms of payment to process customer financial transactions,
including e-cash, credit cards, wire-transfers, money-orders and personal
account debits;
o use the services of an experienced third party company, which will process
the authentication of players' credit cards, process the financial wagering
transactions that occur while playing our the on-line bingo game, and
distribute the funds to the player;
o process (accept or reject), in a short period of time, the relevant
personal and financial information when a patron decides to register and
open an account;
o allow patrons to elect to play any Bingo.com (Antigua) games and wager on
their accounts;
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o allow patrons to review their accounts and cash-out at any time;
o not extend credit services to the players;
o implement procedures and policies designed to protect customer data and
information with high-level security systems and password encryption
software;
o offer a 24 hour 7 days a week support line to the players, which is
anticipated to be staffed by a minimum of two knowledgeable persons at all
times, and increased when traffic increases;
o offer its customers access to customer service to answer questions or to
take customer comments through a 1-800 telephone service and e-mail; and
o provide solid support for customer satisfaction and accessibility to
customers.
Players who desire to play the Bingo.com (Antigua) on-line bingo game must
download proprietary software and agree to play under the rules and guidelines
established by Bingo.com (Antigua).
We anticipate the players who play the on-line bingo game in the free mode will
be required to register with Bingo.com (Antigua) for screening and marketing
purposes, but will not be subject to the scrutiny that is applied to players
playing in the wagering mode.
We anticipate that Bingo.com (Antigua) will establish its operations base and
staff in Antigua and begin operation of its on-line bingo game in June 1999.
Bingo.com (Antigua) Fulfillment and Security
Bingo.com (Antigua) has entered into an agreement with Global Payment Systems or
"GPS" to process the wagering financial transactions. GPS has significant
experience in processing credit card transactions and offers a real-time payment
processing system. In addition, GPS has experience in the wagering industry. GPS
has been in the business of processing and administering financial transactions
for several years and we believe GPS will offer the benefits of reliable, secure
payment processing functionality. The player will be protected, as their funds
will be on deposit with a recognized international bank, while Bingo.com
(Antigua) is anticipated to benefit from GPS's low incidence of player
charge-backs and credit card fraud. A further benefit to Bingo.com (Antigua) is
that they will not have to bear the cost of developing and maintaining complex
systems, infrastructure, and overhead to process credit card transactions.
We believe the benefits of the GPS service are: (1) secure communication lines
between Bingo.com (Antigua) and GPS; (2) the customer payment information is
encrypted to prevent alteration or tampering; and, (3) the messages are
authenticated to verify the identity of the
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parties sending and receiving the payment processing request. Access to GPS's
servers is secure, monitored and controlled 24 hours a day, seven days a week.
Bingo.com (Antigua) Market Strategy
Wagering over the Internet represents a category of e-commerce. While some forms
of business to consumer e-commerce have been slow to be accepted by the
consumer, we believe that wagering over the Internet has grown rapidly. There
are many forms of Internet wagering including casinos offering poker, blackjack
and other games of chance, and sports and pari-mutuels betting and lotteries. We
estimate that there are currently approximately 300 wagering web sites.
We believe that bingo is a widely accepted form of wagering, stemming from its
association with churches and charities and its more social character when
compared to poker and other similar games of chance. Bingo has been transformed
during the last two decades from being played in bingo halls with paper cards to
the use of electronic bingo boards to the current offering of bingo over the
Internet. We believe that there are approximately 30 Internet sites that offer
web-based bingo, including, among others, IBingo, Bingomania and Bingo Zone.
Bingo.com (Antigua)'s target market will consist of individuals located
throughout the world, who are current on-line users and at least 18 years of age
(or such age as is applicable in their jurisdiction of residence). Bingo.com
(Antigua)'s target market for its wagering mode on-line bingo game will be
subject to Bingo.com (Antigua)'s policy regarding blocking in certain
jurisdictions, if any. We estimate that there are currently 60 to 80 million
people worldwide who regularly access the Internet, and that Internet use is
expected to grow.
We anticipate that Bingo.com (Antigua) will attract patrons to its service by
providing the innovative use of multimedia design and a unique on-line bingo
game that will create a dynamic environment. The Bingo.com (Antigua) bingo game
web-site has been designed to be simple and user-friendly.
In order to create interest and awareness, Bingo.com (Antigua) will focus its
marketing efforts primarily on traditional media advertising, public relations
programs, on-line promotions, business development, third-party relationships
and social programs. While Bingo.com (Antigua) is not currently conducting any
marketing programs, Bingo.com (Antigua) is preparing a detailed marketing and
advertising program which will begin with the launch of the on-line bingo game.
To ensure the creation of an effective advertising program, Bingo.com (Antigua)
is currently negotiating with an established marketing communications firm and a
media buying company to oversee Bingo.com (Antigua)'s promotional efforts and
advertising needs.
Bingo.com (Antigua) does not currently intend to limit its marketing and
advertising program to particular jurisdictions.
Anticipated Gaming Revenue
We believe Bingo.com (Antigua) may derive revenue from four sources:
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- Online wagering - gaming revenues;
- Memberships;
- Licensing - An initial license fee from the sale of licenses to third
party gaming companies to use the proprietary bingo gaming software
and an on-going royalty based on the third party gaming companies'
revenue; and,
- Banner and advertising revenues.
Bingo.com (Antigua) Business Development and Start-up Costs
As of May 15, 1999, we have expended approximately $548,000 on research and
development activities related to the on-line bingo game. Effective February 3,
1999, we entered into an understanding with Mindquake Software for the design
and development of bingo gaming software. Pursuant to the terms of our
understanding, we anticipate we will enter into a definitive agreement, under
which Mindquake will assign to Bingo.com (Antigua) all right, title and interest
in the software designed and developed for Internet bingo. As of May 15, 1999,
we have paid Mindquake approximately $392,000 related to the development and
installation of gaming software.
Bingo.com (Antigua) Employees
As of May 31, 1999, Bingo.com (Antigua) had one full-time consultant. From time
to time, Bingo.com (Antigua) may also retain additional consultants and
consulting firms to provide expertise in financing, marketing and developing
software and telecommunications technologies related to its business.
Bingo.com (Antigua) Competition
The Internet wagering business is highly competitive, and Bingo.com (Antigua)
will face competition from North American and foreign casino and bingo
operators. Bingo.com (Antigua) has defined its competition as those Web sites
specifically dedicated to offering the visitor a chance to play bingo or
lotteries online or online casinos that allow the visitor to play other games of
chance such as roulette, blackjack, poker or slot machines. We do not believe
that Bingo.com (Antigua) will compete with traditional bingo halls offering
paper based games, electronic bingo systems or land-based casinos, as the
players who wish to participate in those venues have made a decision to play in
a tangible rather than a virtual environment.
Generally, Internet gaming sites can be accessed through any of the established
branded portals by using a key word search. We believe that gaming sites compete
on the basis of:
o Site design;
o Ease and use;
o The variety of games that a player can play;
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o Accessibility;
o The number of games that a player can play at any one time;
o Size of the pay-outs;
o Confidentiality and security of information and account status;
o Reputation of the web site;
o Prompt payment of winnings, new game software development, chat
groups;
o Speed of the games; and
o 24-hour 7-days per week customer service.
We believe there are over 300 on-line casinos offering gaming on the Internet
and approximately 30 on-line casinos with bingo or keno. Ibingo, Bingomania and
Bingo Zone are a few examples of competitors whose sites are specifically
dedicated to online bingo while MaPau Casino, Sands of the Caribbean and English
Harbour Casino are examples of online casino competitors.
We believe there are substantial market barriers facing potential providers of
Internet gaming, such as Bingo.com (Antigua), including technology, commerce,
regulation, management and reputation. We believe that each of these market
barriers must be overcome to establish and maintain a successful Internet gaming
operation.
Bingo.com (Antigua) Patents, Copyrights and Trade Secrets
As of the date of this registration statement, Bingo.com (Antigua) does not own
or otherwise control any registered patents, copyrights or trademarks. However,
on April 29, 1999, we filed a Provisional Application, to seek patent protection
for our proprietary bingo gaming software, with the United States Patent Office
on behalf of Bingo.com (Antigua). The Provisional Application, as a result of
the anticipated assignment of the right, title and interest in the on-line bingo
gaming software designed and developed by Mindquake to Bingo.com (Antigua), will
allow one year to prepare and submit a formal patent application to the United
States Patent Office. In addition to this protection, we may attempt to protect
our proprietary technology by relying on trade secret laws and non-disclosure
and confidentiality agreements with their employees and consultants who have
access to their proprietary technology.
Internet Gaming Regulation
Many countries are currently struggling with issues surrounding wagering and
gambling over the Internet. More specifically, they are considering the merits,
limitations and enforceability of prohibition, regulation or taxation of
wagering and gambling transactions that are carried out
15
over the Internet. There are significant differences of opinion and law between
countries such as the United States, Canada, Australia, Liechtenstein and
Antigua.
In the United States, the ownership and operation of land-based gaming
facilities has traditionally been regulated on a state by state basis, although
the vast majority of states have legalized some form of gaming activities. All
50 states currently have statutes or regulations regarding gaming activities,
and three states have no gaming at all. In most states it is illegal to place or
accept a wager, with specific state-by-state statutory exceptions. It should
also be noted that certain of Bingo.com (Antigua)'s competitors have been the
subject of criminal complaints at the state level in Minnesota (Minnesota v.
Granite Gate Resorts, Inc., 568 N.W.2d 715 (1997)), Missouri (Missouri v.
Interactive Gaming & Communications Corp., No. CV 97-7808 (Mo.Cir.Ct. 6/16/97)),
and New York (New York v. World Interactive Gaming Corporation (action filed
7/13/98)).
The United States Federal Interstate Wire Act contains provisions which make it
a crime for anyone in the business of gaming to use an interstate or
international telephone line to transmit information assisting in the placing of
wagers, unless the wagering is legal in the jurisdictions from which and into
which the transmission is made. There are other federal laws impacting gaming
activities including the Interstate Wagering Paraphernalia Act, the Travel Act
and the Organized Crime Control Act. However, it remains unresolved whether
these other laws apply to gaming conducted over the Internet.
Various U.S. regulatory and legislative agencies are conducting studies of
interstate and interactive wagering and one, the National Gambling Impact Study
Commission, has stated that it will recommend the prohibition of Internet
gambling within the United States and the development of enforcement strategies
by the Department of Justice.
In addition, the United States Congress is considering the 1999 Kyl bill
(S-692), which could prohibit or limit either the intrastate or interstate
activities Bingo.com (Antigua) engages in or the type of activities associated
with such wagering. In May 1999, the Senate Judiciary subcommittee on
technology, terrorism and government information passed the Kyl bill by a voice
vote. We believe that any change in either the substance or the enforcement of
the applicable or proposed rules and regulations in these areas could have an
adverse effect on our business and prospects.
In other areas of the world, there are countries and states that are legalizing
Internet gaming and moving toward regulation and licensing of operators. For
example:
o Queensland, Australia, has chosen to protect gaming consumers who play
games offered over the Internet through regulation embodied in the
Interactive Gambling (Player Protection) Act 1998. The primary aim of
the Act is to regulate Internet gaming, and to provide players with
protection mechanisms in a secure regulatory environment. The Act
requires all players to be registered, subject to providing
satisfactory proof of identity, residence and age. The Queensland
Office of Gaming Regulation is administering the Act to ensure that
interactive gambling is conducted in accordance with a consistently
high level of probability and integrity.
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o The United Kingdom is sponsoring a web site for its national lottery.
o One of the biggest Internet lotteries `One Billion Through Millions
2000' is sponsored by the principality of Liechtenstein under contract
with the International Red Cross.
o Dominica sponsors its own Internet gambling web site.
o A number of Caribbean countries accept Internet gambling as legal.
Bingo.com (Antigua) Regulatory Compliance
On April 16, 1999, Bingo.com (Antigua) was granted a license to operate its
Internet casino by the Antigua government, under the "Virtual Casino Wagering
and Sports Book Wagering Regulations" promulgated under Section 27 of the
Antigua Free Trade and Processing Zone Act, 1994. Bingo.com (Antigua) must
adhere to the legal requirements of each jurisdiction in which it operates or
offers its services or is deemed to operate or offer its services.
We anticipate Bingo.com (Antigua) may take measures to block players certain
jurisdictions from wagering where the regulatory environment is uncertain.
Bingo.com (Antigua) may place a legal notice on the web site advising players of
their responsibility to comply with the laws of their jurisdiction of residency.
Although Bingo.com (Antigua) may implement policies and procedures designed to
comply with the laws of each jurisdiction where its on-line bingo game is
offered, we cannot guarantee that players will not use methods of disguising
their identity, residency or age, which would allow them to wager on our on-line
bingo games. To accommodate the regulatory schemes of various jurisdictions, we
expect that Bingo.com (Antigua) may offer two versions of its online bingo game:
free mode and wager mode.
Residents in jurisdictions where the legality of Internet gaming is uncertain
will be allowed to play our on-line bingo game in free mode. The free mode is
intended promote and generate traffic to our on-line bingo web site which in
turn, is expected to create a demand for banner advertisements.
We believe that Bingo.com (Antigua)'s activities will conform to current gaming
laws and regulations. However, there is little case law authority related to the
interpretation of gaming statutes as they relate to the Internet and the wording
of many of the applicable statutes is ambiguous. Consequently, it is possible
that Bingo.com (Antigua)'s planned activities may be alleged to violate an
applicable statute based on an interpretation of the statute, which differs from
ours, or based on a future change of law or interpretation or enforcement
policy. Such allegations could result in either civil or criminal proceedings
brought by governmental or private litigants. As a result of such proceedings,
we or Bingo.com (Antigua) could incur substantial litigation expense, fines,
diversion of the attention of key employees, and injunctions or other
prohibitions preventing Bingo.com (Antigua) from engaging in various anticipated
business activities. Also, if it were finally determined that Bingo.com
(Antigua) did violate applicable law, then civil damages or criminal penalties
could be imposed and Bingo.com (Antigua) might be barred from pursuing that
activity. Such an outcome would have a material adverse effect on our business
and our results of operations.
17
Development of the Business of Bingo.com, Bingo.com (Canada) and Bingo.com
(Antigua)
Since January 1999, we have taken the following steps to implement our business
plans:
o Incorporated our operating subsidiaries;
o Completed a first and second round of funding in the amounts of
US$1,000,000 and US$5,000,000;
o Purchased the right to use the domain name "Bingo.com";
o Retained experienced senior management and consultants;
o Conducted market research for the development and marketing of the
Bingo.com (Canada) portal;
o Began developing a cross-functional plan to implement our business
strategy;
o Retained Stratford Internet Technologies Inc. to develop the Bingo.com
(Canada) portal Web site;
o Completed phase one of the development of the Bingo.com (Canada)
portal and launched the Bingo.com (Canada) portal;
o Obtained the license to operate on-line bingo gaming in Antigua;
o Retained Mindquake Software Inc. to develop the on-line bingo gaming
software;
o Substantially completed beta testing of the on-line bingo gaming
software;
o Installed the servers in Antigua for the on-line bingo gaming web
site;
o Substantially completed establishing the on-line bingo gaming
operations in Antigua;
o Implemented internal financial controls;
o Filed a Provisional Application with the United States Patent Office;
and
o Initiated the filing process for trademark protection of various brand
logos and phrases related to our business.
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RISK FACTORS
We have included information in this registration statement that contains
"forward looking statements." Our actual results may materially differ from
those projected in the forward looking statements as a result of risks and
uncertainties. Although we believe that the assumptions made and expectations
reflected in the forward looking statements are reasonable, we cannot assure you
that the underlying assumptions will, in fact, prove to be correct or that
actual future results will not be different from the expectations expressed in
this report. An investment in our securities is speculative in nature and
involves a high degree of risk. You should read this registration statement
carefully and consider the following risk factors.
General
We have a Limited Operating History and a History of Losses, which Makes Our
Ability to Continue as a Going Concern Questionable
We are a development stage company and our operations and the operation of our
subsidiaries are subject to all of the risks inherent in light of the expenses,
difficulties, complications and delays frequently encountered in connection with
the formation of any new business. We have incurred net losses since our
inception and anticipate that we will continue to incur losses for the
foreseeable future. During the fiscal years ended December 31, 1996, 1997 and
1998 and the first quarter of 1999, we incurred cumulative net losses of
$265,517, including a net loss of $258,713 for the first quarter 1999. You
should evaluate us in light of the delays, expenses, problems and uncertainties
frequently encountered by companies developing markets for new products and
technologies. Due to a number of factors, we do not believe that revenues
generated by our subsidiaries will be sufficient to support our operations in
fiscal 1999. Therefore, in the foreseeable future, we believe that such expenses
will increase our net losses, and we cannot assure you that we will ever be
profitable.
You should evaluate our business in light of the risks and difficulties
frequently encountered by early stage companies engaged in Internet commerce.
These risks include:
- our significant dependence on services with only limited market
acceptance;
- our ability to develop and upgrade our infrastructure, including
internal controls, transaction processing capacity, data storage and
retrieval systems and Web site;
- competition;
- our need to manage changing operations;
- our reliance upon the Internet for commerce;
- our reliance upon general economic conditions; -
19
- our reliance upon strategic relationships;
- regulatory risks associated with our business; and
- our dependence upon and need to hire key personnel.
Because we have only recently begun operations, it is difficult to evaluate our
business and our prospects. Our revenue and income potential is unproven and our
business model is still emerging. We cannot assure you that Bingo.com (Canada)
will attract new registered users, advertisers, consumers and network affiliates
or achieve significant revenues or operating margins in future periods. We also
cannot assure you that Bingo.com (Antigua)'s Internet on-line bingo game will
attract players or that Bingo.com (Antigua) will successfully overcome the
technical and regulatory requirements to operate its planned business or
establish a sizable market share. We cannot guarantee we will ever achieve
commercial success.
As of May 15, 1999, we had approximately $4,950,000 in cash, and we will, on
average, expend approximately $400,000 per month. While we anticipate raising
additional capital through private placements of our common stock, we cannot
assure you that we will be able to obtain adequate financing to support our
operations. Even if we are unable to raise additional capital, we believe that
we will have sufficient funds to commence and conduct our operations for at
least the next 12 months, without considering any revenues generated from the
operations of our subsidiaries.
We Cannot Assure You that there will be a Continued Market for Our Shares
Currently, our common shares are traded on the OTCBB under the symbol "BIGG". On
January 4, 1999, the SEC approved eligibility rules for issuers quoted on the
OTCBB and established minimum eligibility requirements for all securities quoted
on the OTCBB. As a result of the eligibility rules, we must (i) register our
shares with the SEC under Section 12 of the Exchange Act, and (ii) be current in
our required filings to remain eligible for quotation on the OTCBB.
We cannot assure you we will be able to fully comply with its eligibility
requirements on or before our phase-in date. Although we have filed this
registration statement to become a reporting company under the Exchange Act,
there can be no assurance that we will maintain eligibility for quotation on the
OTCBB or that an active public market for our shares will be sustained.
Our Foreign Operations are Subject to Risks
Bingo.com (Antigua) and Bingo.com (Canada) may derive substantially all of their
revenues from non-United States sources. Risks inherent in foreign operations
include loss of revenue, property and equipment from such hazards as
expropriation, nationalization, war, insurrection and other political risks,
risks of increase in taxes and governmental royalties, renegotiations of
contracts with governmental entities, as well as changes in laws and policies
governing
20
operations of foreign based companies. Other risks inherent in foreign
operations are the possibility of realizing foreign currency exchange losses
when transactions are completed in currencies other than United States dollars
and our subsidiaries' ability or lack of same to freely repatriate their
earnings under foreign exchange control laws.
Furthermore, Bingo.com (Antigua) may have to comply with the local laws and
regulations in those foreign jurisdictions in which they elect or are deemed to
elect to offer products and services. We cannot assure you that our subsidiaries
will be able to comply with such laws and regulations. See "Regulation". In the
past, there have been significant fluctuations in the exchange rates between the
dollar and the currencies in many of the countries in which we or our
subsidiaries anticipate our doing business. Further, foreign countries may
impose limitations on the amount of currency that may be withdrawn or
repatriated from such countries. Such limitations, if imposed, could adversely
affect our liquidity and business.
We Depend on Our Key Personnel and the Personnel of Our Subsidiaries for Success
The future success of Bingo.com (Antigua), Bingo.com (Canada) and us will depend
on certain key management, marketing, sales and technical personnel. Our
subsidiaries primarily rely upon consultants and advisors who are not employees.
The loss of key personnel by our subsidiaries could have an adverse effect on
our operations. We do not maintain key-man life insurance on any of our key
personnel, and our subsidiaries do not insure their key personnel. Our
subsidiaries also plan to hire additional key employees in 1999. Competition for
qualified employees is intense, and an inability to attract, retain and motivate
additional, highly skilled personnel required for expansion of operations and
development of technologies could adversely affect our business, financial
condition and results of operations. Our subsidiaries' ability to retain
existing personnel and attract new personnel may also be adversely affected by
their current financial situation. We cannot assure you that our subsidiaries
will be able to retain their existing personnel or attract additional, qualified
persons when required and on acceptable terms.
We May be Required to Sell Additional Common Stock or Parties May Exercise
Options and Warrants that Cause Dilution of Your Shares
The number of shares of our outstanding Common Stock held by non-affiliates is
large relative to the trading volume of the Common Stock. Any substantial sale
of our Common Stock or even the possibility of such sales occurring may have an
adverse effect on the market price of the Common Stock.
As of May 31, 1999, we had outstanding warrants to purchase an aggregate of
916,668 shares of Common Stock.
We have also reserved up to an additional 1,145,000 shares of Common Stock for
issuance upon exercise of options which have not yet been granted under a stock
option plan, which we intend to approve and adopt. Holders of such warrants and
options are likely to exercise them when, in all likelihood, we could obtain
additional capital on terms more favorable than those provided by the options
and warrants. Further, while our warrants and options are outstanding, our
ability to obtain additional financing on favorable terms may be adversely
affected.
21
We have Capacity Constraints and System Development Risks that could Damage Our
Customer Relations or Inhibit Our Possible Growth, and We May Need to Expand Our
Management Systems and Controls Quickly
Our success and, in particular, our subsidiaries' abilities to provide high
quality customer service, largely depends on the efficient and uninterrupted
operation of our computer and communications systems and the computers and
communication systems of our third party vendors in order to accommodate any
significant numbers or increases in the numbers of consumers and advertisers
using our service. Our success also depends upon the subsidiaries' and our
vendors' abilities to rapidly expand transaction-processing systems and network
infrastructure without any systems interruptions in order to accommodate any
significant increases in use of our service.
Although we anticipate that our subsidiaries and our vendors will enhance and
expand their transaction-processing systems and network infrastructure as they
grow, they may experience periodic systems interruptions and infrastructure
failures, which we believe may cause customer dissatisfaction and may adversely
affect our results of operations. Limitations of our subsidiaries' and vendors'
technology infrastructure may prevent us from maximizing our business
opportunities.
While we believe that our subsidiaries' and vendors' data repositories,
financial systems and other technology resources will be secure from security
breaches or sabotage, we cannot assure you that this will continue to be true as
technology changes and becomes more sophisticated. In addition, we expect that
many of our subsidiaries' and vendors' software systems may be custom-developed
and that our subsidiaries and vendors may rely on employees and certain
third-party contractors to develop and maintain these systems. If certain of
these employees or contractors become unavailable, our subsidiaries and vendors
may experience difficulty in improving and maintaining these systems.
Furthermore, we expect that our subsidiaries and vendors may continue to be
required to manage multiple relationships with various software and equipment
vendors whose technologies may not be compatible, as well as relationships with
other third parties to maintain and enhance their technology infrastructures.
Our subsidiaries' and our vendors' failure to achieve or maintain high capacity
data transmission and security without system downtime and to achieve
improvements in their transaction processing systems and network infrastructure
could adversely affect our business and results of operations.
Increased Security Risks of Online Commerce May Deter Future Use of Our
Subsidiaries' Services
Concerns over the security of transactions conducted on the Internet and the
privacy of consumers may also inhibit the growth of the Internet and other
online services generally, and online commerce in particular. Our subsidiaries'
or vendors' failure to prevent security breaches could significantly harm our
business and results of operations. We cannot be certain that advances in
computer capabilities, new discoveries in the field of cryptography, or other
developments will not result in a compromise or breach of the algorithms used to
protect our vendors' and subsidiaries' transaction data. Anyone who is able to
circumvent our subsidiaries'
22
or vendors' security measures could misappropriate proprietary information,
cause interruptions in their operations or damage our brand and reputation. Our
subsidiaries may be required to incur significant costs to protect against
security breaches or to alleviate problems caused by breaches. Any
well-publicized compromise of security could deter people from using the
Internet to conduct transactions that involve transmitting confidential
information or downloading sensitive materials.
Our Subsidiaries Face the Risks of System Failures
A disaster could severely damage our business and results of operations because
our services could be interrupted for an indeterminate length of time. Our
operations depend upon our ability to maintain and protect our computer systems,
most of which are located in our principal business headquarters and at a
third-party facility in Antigua.
The systems and operations of our subsidiaries are vulnerable to damage or
interruption from fire, floods, earthquakes, hurricanes, power loss,
telecommunications failures, break-ins, sabotage and similar events. The
occurrence of a natural disaster or unanticipated problems at our principal
business headquarters or at a third-party facility could cause interruptions or
delays in our business, loss of data or render us unable to provide our
services. In addition, failure of a third-party facility to provide the data
communications capacity required by us, as a result of human error, natural
disaster or other operational disruptions, could cause interruptions in our
service. The occurrence of any or all of these events could adversely affect our
reputation, brand and business.
We Face Risks of Claims from Third Parties for Intellectual Property
Infringement that Could Adversely Affect Our Business
We anticipate that all of the services of our subsidiaries will operate in part
by making Internet services and content available to our users. This creates the
potential for claims to be made against us, either directly or through
contractual indemnification provisions with third parties. These claims might,
for example, be made for defamation, negligence, copyright, trademark or patent
infringement, personal injury, invasion of privacy or other legal theories. We
receive correspondence alleging some of these types of claims from time to time.
Any claims could result in costly litigation and be time consuming to defend,
divert management's attention and resources, cause delays in releasing new or
upgrading existing services or require us to enter into royalty or licensing
agreements.
Litigation regarding intellectual property rights is common in the Internet and
software industries. We expect that Internet technologies and software products
and services may be increasingly subject to third-party infringement claims as
the number of competitors in our industry segment grows and the functionality of
products in different industry segments overlaps. There can be no assurance that
our services do not infringe the intellectual property rights of third parties.
23
Royalty or licensing agreements, if required, may not be available on acceptable
terms, if at all. A successful claim of infringement against us and our failure
or inability to license the infringed or similar technology could adversely
affect our business.
Our success and ability to compete are substantially dependent upon our
technology and data resources, which we intend to protect through a combination
of patent, copyright, trade secret and/or trademark law. We have no patents or
trademarks issued to date on our technology.
Bingo.com (Antigua)'s bingo gaming software was developed by Mindquake. Although
we believe that the software does not infringe on intellectual property rights
of others, we cannot assure you that we will not be subject to third-party
infringement claims as the number of competitors in our industry segment
increase.
We May Not be Able to Protect Our Internet Domain Name
We anticipate that the Internet domain name, "Bingo.com," will be an extremely
important part of our business and the business of our subsidiaries.
Governmental agencies and their designees generally regulate the acquisition and
maintenance of domain names. The regulation of domain names in the United States
and in foreign countries may be subject to change in the near future. Governing
bodies may establish additional top-level domains, appoint additional domain
name registrars or modify the requirements for holding domain names. As a
result, we may be unable to acquire or maintain relevant domain names in all
countries in which we conduct business. Furthermore, the relationship between
regulations governing domain names and laws protecting trademarks and similar
proprietary rights is unclear. Therefore, we may be unable to prevent third
parties from acquiring domain names that are similar to, infringe upon or
otherwise decrease the value of our trademarks and other proprietary rights.
Third parties have acquired domain names that include "bingo" or variations
thereof both in the United States and elsewhere.
We Anticipate Our Subsidiaries' Markets May Undergo Rapid Technological Change
and Our Future Success May Depend on Our Subsidiaries' Ability to Meet the
Changing Needs of Their Industries
To remain competitive, our subsidiaries must be capable of enhancing and
improving the functionality and features of their online services. The Internet
portal, the on-line advertising industry and the Internet gaming industry are
rapidly changing. If competitors introduce new products and services embodying
new technologies, or if new industry standards and practices emerge, our
subsidiaries' existing services, technology and systems may become obsolete.
Our future success will depend on our subsidiaries' abilities to accomplish the
following:
o license and develop leading technologies useful in our business;
o develop and enhance our planned products and services;
24
o develop new services and technologies that address the increasingly
sophisticated and varied needs of prospective consumers; and
o respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
Developing Internet services and other proprietary technology entails
significant technical and business risks, as well as substantial costs. Our
subsidiaries may use new technologies ineffectively, or they may fail to adapt
their services, transaction-processing systems and network infrastructure to
user requirements or emerging industry standards. If our subsidiaries'
operations face material delays in introducing new services, products and
enhancements, their users may forego the use of their services and use those of
their competitors.
We Do Not Intend to Declare Dividends
We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
Our Shares are Considered Penny Stocks and are Subject to the Penny Stock Rules
Rules 15g-1 through 15g-9 promulgated under the Exchange Act impose sales
practice and disclosure requirements on certain brokers-dealers who engage in
certain transactions involving "a penny stock." Subject to certain exceptions, a
penny stock generally includes any non-NASDAQ equity security that has a market
price of less than $5.00 per share. Our shares are expected to be deemed penny
stock for the purposes of the Exchange Act. The additional sales practice and
disclosure requirements imposed upon brokers-dealers may discourage
broker-dealers from effecting transactions in our shares, which could severely
limit the market liquidity of the Shares and impede the sale of our shares in
the secondary market.
Under the penny stock regulations, a broker-dealer selling penny stock to anyone
other than an established customer or "accredited investor" (generally, an
individual with net worth in excess of $1,000,000 or an annual income exceeding
$200,000, or $300,000 together with his or her spouse) must make a special
suitability determination for the purchaser and must receive the purchaser's
written consent to the transaction prior to sale, unless the broker-dealer or
the transaction is otherwise exempt. In addition, the penny stock regulations
require the broker-dealer to deliver, prior to any transaction involving a penny
stock, a disclosure schedule prepared by the Commission relating to the penny
stock market, unless the broker-dealer or the transaction is otherwise exempt. A
broker-dealer is also required to disclose commissions payable to the
broker-dealer and the registered representative and current quotations for the
securities. Finally, a broker-dealer is required to send monthly statements
disclosing recent price information with respect to the penny stock held in a
customer's account and information with respect to the limited market in penny
stocks.
25
Risks Associated with the Bingo.com (Canada) Portal
The Results of Operations for the Bingo.com (Canada) Portal Will Vary Depending
on a Number of Factors
We anticipate the operating results of Bingo.com (Canada)'s Portal will vary
widely depending on a number of factors, some that are beyond the control of
Bingo.com (Canada). These factors are likely to include:
o demand for our online services by registered users, advertisers and
consumers, including the number of searches performed by registered
users, consumers and the rate at which they click-through to paid
search listing advertisements;
o prices paid by advertisers using the Bingo.com (Canada) service, which
are not determined by Bingo.com (Canada);
o our costs of attracting consumers to the Bingo.com (Canada) Web site,
including costs of receiving exposure on third-party Web sites and
advertising costs;
o costs related to forming strategic relationships;
o loss of strategic relationships;
o the mix of paying vs. non-paying search results on the Bingo.com
(Canada) service;
o our ability to significantly increase our distribution channels;
o competition;
o the amount and timing of operating costs and capital expenditures
relating to expansion of our operations;
o costs and delays in introducing new Bingo.com (Canada) services and
improvements to existing services;
o changes in the growth rate of Internet usage and acceptance by
consumers of electronic commerce;
o technical difficulties, system failures or Internet downtime;
o government regulations related to our business and to the Internet;
26
o our ability to upgrade and develop our information technology systems
and infrastructure;
o costs related to acquisitions of technologies or businesses; and
o general economic conditions, as well as those specific to the Internet
and related industries.
Because Bingo.com (Canada) has no operating history, it is difficult to
accurately forecast the revenues that will be generated by our subsidiaries.
We plan to significantly increase our operating expenses to expand our marketing
and sales operations related to Bingo.com (Canada), establish customer support
capabilities and fund the development of the Bingo.com (Canada) portal. We have
based our current and future expense levels on the operating plans and estimates
of future revenue for Bingo.com (Canada). We anticipate that the expenses
related to Bingo.com (Canada) may increase. The revenue and operating results
for Bingo.com (Canada) are difficult to forecast because they generally depend
upon the volume of the searches conducted on the Bingo.com (Canada) portal, the
amounts paid by advertisers for keyword search listings on the portal and the
number of advertisers that bid on the service, none of which are under our
control. As a result, we may be unable to adjust our spending in a timely manner
to compensate for any unexpected revenue shortfall. We also may be unable to
increase our spending and expand our operations in a timely manner to adequately
meet user demand to the extent it exceeds our expectations.
The Success of Our Bingo.Com (Canada) Portal May Depend Upon Achieving a
Critical Mass of Registered Users, Advertisers and Consumers
The success of our portal may be dependent upon achieving significant market
acceptance of our portal by registered users, advertisers and consumers. Our
portal has achieved very limited market acceptance to date. Internet advertising
in general is at an early stage of development. Most potential advertisers have
only limited experience advertising on the Internet and have not devoted a
significant portion of their advertising expenditures to Internet advertising.
Advertising through priority placement on our search service in particular will
be introduced in the future, and we cannot predict the level of its acceptance
as an advertising medium, even if we achieve initial market acceptance. Although
we believe that our portal will offer a cost-effective advertising solution, our
competitors and potential competitors may offer more cost-effective advertising
solutions, which could damage our business. In addition, although we believe our
portal will provide more relevant search results than those provided by
traditional search methods, our service may not achieve significant acceptance
by registered users and consumers. Failure to achieve and maintain a critical
mass of registered users; advertisers and consumers would seriously harm our
business.
Our Portal May be Dependent Upon Online Marketing Partners, and Our Future
Success is Dependent Upon Developing a Relationship with a Network of Affilates.
27
We anticipate that our portal may depend on traffic from a limited number of
third party Web sites. We anticipate Bingo.com (Canada) will obtain traffic from
these sources pursuant to short term agreements. Bingo.com (Canada) currently
has no agreements in place and there can be no assurance that they will be
successful in obtaining any of these agreements on commercially acceptable
terms.
We also believe that our future success in penetrating our target markets
depends in part on Bingo.com (Canada)'s ability to further develop and maintain
relationships with network affiliates. These network affiliates provide their
users with the Bingo.com (Canada) portal search capabilities on their sites or
direct their traffic to the Bingo.com (Canada) Web site. We believe these
relationships are important in order to facilitate broad market acceptance of
our service and enhance Bingo.com (Canada)'s sales. Our future ability to
attract consumers to our portal service may be dependent upon the growth of our
network affiliates, which has not yet been established. If we are unable to
obtain agreements or arrangements for traffic on commercially acceptable terms
or to establish a relationship with a network of affiliates, our portal business
may never be successfully launched.
The Portal Industry is Highly Competitive, and We Cannot Assure You that We will
be Able to Compete Effectively
The market for Internet products, services and advertising is new, rapidly
evolving and intensely competitive. Our portal will potentially compete with
many other providers of Web directories, search and information services as well
as traditional media for consumer attention and advertising expenditures. We
expect competition to intensify in the future. Barriers to entry may not be
significant, and current and new competitors may be able to launch new Web sites
at a relatively low cost. Accordingly, we believe that our success may depend
heavily upon achieving significant market acceptance before our competitors and
potential competitors introduce competing services.
We anticipate that Bingo.com (Canada) will compete with online services, other
Web sites and advertising networks, as well as traditional offline media such as
television, radio and print for a share of advertisers' total advertising
budgets. We believe that the number of companies selling Web-based advertising
and the available inventory of advertising space has recently increased
substantially. Accordingly, Bingo.com (Canada) may face increased pricing
pressure for the sale of advertisements and direct marketing opportunities,
which could adversely affect our business and operating results.
Bingo.com (Canada) will also compete with providers of Web directories, search
and information services, all of whom offer advertising, including, among
others, America Online, Inc. (AOL.com, NetFind and Netscape Netcenter),
AskJeeves, Inc., CNET, Inc. (Snap), Excite, Inc. (including WebCrawler and
Magellan), LookSmart, Ltd., Lycos, Inc. (including HotBot), Microsoft
Corporation (LinkExchange, Inc. and msn.com), The Walt Disney Company/Infoseek
Corporation (including the Go Network), Goto Net and Yahoo! Inc. In addition, we
expect that other companies will offer directly competing services in the
future. For example, we expect AltaVista, a division of Compaq Computer
Corporation, to offer such a service.
28
Most providers of Web directories and search and information services offer
additional features and content that Bingo.com (Canada) has elected not to
offer. Also, many of these competitors, as well as potential entrants into our
market, have longer operating histories, larger customer or user bases, greater
brand recognition and significantly greater financial, marketing and other
resources than we do. Many of these current and potential competitors can devote
substantially greater resources to promotion and Web site and systems
development than we can. In addition, as the use of the Internet and other
online services increases, larger, well-established and well-financed entities
may continue to acquire, invest in or form joint ventures with providers of Web
directories, search and information services or advertising solutions, and
existing providers of Web directories, search and information services or
advertising solutions may continue to consolidate. In addition, providers of
Internet browsers and other Internet products and services who are affiliated
with providers of Web directories and information services in competition with
the Bingo.com (Canada) portal service may more tightly integrate these
affiliated offerings into their browsers or other products or services. Any of
these trends may increase the competition we face and could adversely affect our
business and operating results.
Our Portal Business May be Subject to Government Regulation and Legal
Uncertainties
There are currently few laws or regulations directly applicable to access to, or
commerce on, the Internet. Due to the increasing popularity and use of the
Internet, it is possible that laws and regulations may be adopted, covering
issues such as user privacy, defamation, pricing, taxation, content regulation,
quality of products and services, and intellectual property ownership and
infringement. Such legislation could expose Bingo.com (Canada) to substantial
liability as well as dampen the growth in use of the Internet, decrease the
acceptance of the Internet as a communications and commercial medium, or require
Bingo.com (Canada) to incur significant expenses in complying with any new
regulations. The European Union has recently adopted privacy and copyright
directives that may impose additional burdens and costs on international
operations. In addition, several telecommunications carriers, including
America's Carriers' Telecommunications Association, are seeking to have
telecommunications over the Internet regulated by the Federal Communications
Commission, or FCC, in the same manner as other telecommunications services.
Because the growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure and many areas with high Internet usage have
begun to experience interruptions in phone services, local telephone carriers,
such as Pacific Bell, have petitioned the FCC to regulate the Internet and to
impose access fees. Increased regulation or the imposition of access fees could
substantially increase the costs of communicating on the Web, potentially
decreasing the demand for our service. A number of proposals have been made at
the federal, state and local level that would impose additional taxes on the
sale of goods and services through the Internet. Such proposals, if adopted,
could substantially impair the growth of electronic commerce and could adversely
affect us. Also, Congress recently passed (and the President has signed into
law) the Digital Millenium Copyright Act, which is intended to reduce the
liability of online service providers for listing or linking to third-party Web
sites that include materials that infringe copyrights. Congress also recently
passed (and the President has signed into law) the Children's Online Protection
Act and the Children's Online Privacy Act, which will
29
restrict the distribution of certain materials deemed harmful to children and
impose additional restrictions on the ability of online services to collect user
information from minors. Further, Congress recently passed (and the President
has signed into law) the Protection of Children from Sexual Predators Act, which
mandates that electronic communication service providers report facts or
circumstances from which a violation of child pornography laws is apparent.
Bingo.com (Canada) is currently reviewing various pieces of legislation, and
cannot currently predict the effect, if any, that this legislation will have on
our business. There can be no assurance that this legislation will not impose
significant additional costs on our business or subject Bingo.com (Canada) to
additional liabilities. Moreover, the applicability to the Internet of existing
laws governing issues such as property ownership, copyright, defamation,
obscenity and personal privacy is uncertain. Bingo.com (Canada) may be subject
to claims that our services violate such laws. Any new legislation or regulation
in the United States or abroad or the application of existing laws and
regulations to the Internet could damage our business.
Due to the global nature of the Internet, it is possible that the governments of
other states and foreign countries might attempt to regulate its transmissions
or prosecute Bingo.com (Canada) for violations of their laws. Bingo.com (Canada)
might unintentionally violate such laws. Such laws may be modified, or new laws
may be enacted, in the future. Any such development could damage our business.
Risk Related to Internet Bingo
The Gaming Industry has Great Risks
We cannot assure you that we will be able to realize revenues and attain
profitability in the future. Gaming projects are speculative by their nature and
involve a high degree of risk. The gaming business is subject to a number of
factors beyond our control including changes in economic conditions, industry
competition, management risks, changes in gaming products, variability in
operating costs, changes in government and changes in laws and in regulatory
authorities' rules and regulations. Most Internet markets, including the gaming
segment, are growing rapidly and a large number of competitors are entering the
market. We believe there are certain market barriers that could affect Bingo.com
(Antigua)'s ability to enter the market and compete effectively, including
technology, commerce, regulation, management and reputation. In order to
compete, Bingo.com (Antigua) must:
o utilize sophisticated systems to manage its on-line bingo operations,
process financial transactions, encrypt information and provide an
attractive user interface;
o maintain its casino license to offer Internet gaming services to the
public;
o assemble and retain a team made up of employees, consultants and
contractors of software, hardware, telecommunications, marketing,
management and gaming specialists to develop its on-line bingo
operations;
30
o attract a sufficient number of players to conduct its on-line bingo
games; and
o develop and maintain an impeccable reputation in order to attract and
retain customers.
We cannot assure you that Bingo.com (Antigua) will be able to compete
effectively or that Bingo.com (Antigua) will be able to earn a profit. Bingo.com
(Antigua) may be required to raise additional financing or to borrow funds for
its operations. We cannot assure you that we will be able to raise additional
financing to fund Bingo.com (Antigua)'s development. We anticipate that
Bingo.com (Antigua) will be a major part of our business and the inability of
Bingo.com (Antigua) to earn a profit will have a material adverse effect on our
business and results of operations.
Bingo.com (Antigua)'s Business Is Subject To Changing Technologies and
Substantial Competition
Bingo.com (Antigua)'s primary competition includes, but is not limited to,
CryptoLogic Inc., Venturetech Inc., Internet Casinos Ltd., Interactive Gaming
and Communications Corp. (formerly Sports International - USA), Wager Net Inc.,
Casinos of the South Pacific, World Wide Web Casinos and Virtual Vegas. Many of
our competitors have established client bases and have greater capital resources
and technical resources than Bingo.com (Antigua) and us.
The industry of offering gaming services and casino style games over the
Internet is characterized by rapid and significant technological change in the
computer, software and telephony services. Many entities are engaged in research
and development with respect to offering gaming services on the Internet. A
significant number of companies, organizations and individuals are currently
offering or purporting to offer casino gambling services on the Internet similar
to those developed by the Bingo.com (Antigua). We cannot assure you that
Bingo.com (Antigua)'s competitors will not develop technologies and products
that are more effective and efficient than Bingo.com (Antigua)'s technology and
products or that Bingo.com (Antigua)'s technology and products will not be
rendered obsolete by such developments. There can be no assurance that other
companies with greater financial and technological resources will not develop
gaming services over the Internet with better capabilities than those offered by
Bingo.com (Antigua).
There are Several Risks Related to the Regulation of Internet Gaming that May
Affect Our Business.
There is a risk that the operations of Bingo.com (Antigua) will be illegal if
conducted or if the operations are deemed to be conducted in the United States
or other jurisdictions. Internet gaming may be subject to government regulation
in the future. We cannot assure you that we will be allowed to operate in the
markets in which we plan to offer our services or that we will be able to
generate sufficient interest and revenues where our services are permitted. In
addition, there are several jurisdictions that are proposing legislation to
prohibit Internet gaming or make conducting an Internet gaming business less
profitable.
31
The Proposed Internet Gambling Prohibition Act (Kyl Bill) May Potentially Impact
Our Operations
The laws, rules, regulations and policies of the United States may have a
material adverse effect on our business and results of operations. Other
jurisdictions may also adopt laws modeled after laws of the United States or
players in the United States may find ways to circumvent the blocking and
screening mechanisms we may implement to play the Bingo.com game in the wagering
mode. We cannot assure you that any blocking or screening mechanism will be
effective or that our subsidiaries or we will not be subject to enforcement
action in the United States or other jurisdictions.
As such, particular legislation in the United States and enforcement actions by
courts in the United States poses a risk to our business. Below is a description
of the current regulatory environment in the United States:
o On July 23, 1998, the Senate passed an appropriations bill containing
an amendment by Senator John Kyl of Arizona, which would prohibit
gaming on the Internet in the United States (the "Kyl Bill"). If
enacted into law, the Kyl Bill would classify gaming over the Internet
as a federal offense. Although the Kyl Bill allows certain intrastate
wagering, it prohibits operation of most other Internet gaming
businesses, as well as use of the Internet to place, receive or
otherwise make a bet or wager. Individuals convicted of operating an
Internet gaming business in the United States could be punished by up
to four years in jail and a fine equal to the greater of $20,000 or
the aggregate amount of bets received by the operator. Under the Bill,
Internet gaming would be a federal crime even if the states in which
bets are placed had legalized the practice.
o The Attorneys General for at least three states (Florida, Minnesota
and Texas) have issued either formal opinions or warnings that certain
Internet gaming activities are illegal in those states. The Attorney
General for the state of Wisconsin has also taken action against
Internet gaming companies.
o The Federal Interstate Wire Act contains provisions which may make it
a crime for anyone in the business of gambling to use an interstate or
international telephone line to transmit information in the placing of
bets, unless the betting is legal in the jurisdictions from which and
into which the transmission is made. In March 1998, the United States
Attorney for the Southern District of New York filed several criminal
complaints against the owners and managers of six Internet sports
betting companies headquartered in the Caribbean or Central America
under the Wire Act.
o In September 1997, the Minnesota Court of Appeals considered a state
civil consumer protection complaint and concluded that a Belize-based
Internet gambling business was subject to personal jurisdiction in
Minnesota because the company conducted commercial activities in the
state over the Internet. See Minnesota v. Granite Gate Resorts, Inc.,
568 N.W.2d 715 (1997), aff'd, 576 N.W.2d 747 (Minn. 1998).
32
o In March 1998, the United States District Court for the Western
District of Texas concluded that a California casino that maintained a
web site was subject to jurisdiction in Texas since the site was
available in Texas and the casino accepted business from Texas
residents. See Thompson v. Handa-Lopez, Inc., 1998 WL 142300 (W.D.
Tex. Mar. 28, 1998).
There are Substantial Requirements and Licensing Jurisdictional Issues that may
Affect Bingo.com (Antigua)
The gaming industry is highly regulated in many parts of the world where the
ownership and operation of land-based gaming facilities (i.e., not including
sports wagering) of the type to be conducted by Bingo.com (Antigua) have
traditionally been regulated on both the federal and local levels. Bingo.com
(Antigua) must adhere to the legal requirements of each jurisdiction in which it
operates and offers services or is deemed to operate and offer services.
Bingo.com (Antigua) currently intends to offer its services internationally
where such services are permitted. Bingo.com (Antigua) does not currently intend
to seek licenses to operate its Internet casino in any other jurisdiction nor
does Bingo.com (Antigua) intend to restrict or control access to its web site
based on user citizenship or location. However, access to the site to play the
on-line bingo game in the wagering mode may be restricted based on the laws of a
particular jurisdiction.
The law of the Internet is not well developed and there can be no assurance that
authorities will not successfully assert jurisdiction over Bingo.com (Antigua)
for its activities in the event a player plays the on-line bingo game in a
jurisdiction where Internet gaming is prohibited. In the event that it is
determined that Bingo.com (Antigua) is subject to the laws of jurisdictions
other than Antigua, Bingo.com (Antigua) would have to obtain a license in order
to offer its gaming services to customers within these jurisdictions. There can
be no assurance that any such licenses could be obtained. Moreover, if it is
determined that Bingo.com (Antigua) is operating gaming operations in a
jurisdiction without a license, Bingo.com (Antigua) and its officers and
directors may become subject to criminal and civil penalties imposed by such
jurisdiction for violating its laws. The occurrence of any of these events could
have a material adverse effect on our business and, if many jurisdictions were
successful in asserting jurisdiction over Bingo.com (Antigua), Bingo.com
(Antigua) could be forced to cease all gaming operations.
Bingo.com (Antigua) is Exposed to Risks Associated with Credit Card Fraud.
We anticipate that Bingo.com (Antigua) may suffer losses as a result of
fraudulent credit card data, even though the associated financial institution
approved payment of the orders. Under current credit card practices, a merchant
is liable for fraudulent credit card transactions when, as is the case with the
transactions we process, that merchant does not obtain a cardholder's signature.
A failure to adequately control fraudulent credit card transactions would
adversely affect our business.
There is also some uncertainty with respect to the enforceability of credit card
charges made for gaming debts.
33
Item 2. Financial Information.
Selected Financial Data
The following table sets forth selected financial data regarding our
consolidated operating results and financial position. The data has been derived
from our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States
("US GAAP"). See "Management's Discussion and Analysis of Financial Condition
and Results of Operation." The following selected financial data is qualified in
its entirety by, and should be read in conjunction with, the consolidated
financial statements and notes thereto included elsewhere in this Registration
Statement.
- ---------------------------------------------------------------------------------------------------------------
Quarter Ended Year Ended
March 31, December 31,
- ----------------------------------------------------- --------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- --------- ---------- ----------- ---------- ----------- ----------
$ $ $ $ $ $ $
Operating Revenues nil nil 100 nil nil nil nil
General & Administrative 232,713 1,904 1,904 nil nil nil 5,000
Expenses
Net (Loss) from Continuing (258,713) (1,904) (1,804) nil nil nil (5,000)
Operations
Net Loss per Share (0.03) (0.38) nil nil nil nil (1.00)
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Quarter Ended Year Ended
March 31, December 31,
----------- --------- ---------- ----------- ---------- ----------- --------
1999 1998 1998 1997 1996 1995 1994
----------- --------- ---------- ----------- ---------- ----------- --------
$ $ $ $ $ $ $
Working Capital (Deficiency) 341,775 (1,904) (1,804) nil nil nil nil
Total Assets 2,358,910 nil 157,600 nil nil nil nil
Total Liabilities 53,070 1,904 159,404 nil nil nil nil
Shareholders' Equity 2,305,840 (1,904) (1,804) nil nil nil nil
Long-term Obligations nil nil nil nil nil nil nil
Cash Dividends nil nil nil nil nil nil nil
- ---------------------------------------------------------------------------------------------------------------
During the first quarter ended March 31, 1999, we completed a number of
transactions related to implementing our new business plan. These transactions
included a private placement in the amount of $1,000,000 and the acquisition of
our Bingo.com domain name for 500,000 shares of our common stock (at a deemed
value of $2.00 per share) and $200,000 in cash.
Subsequent to March 31, 1999, we completed a private placement of 416,668 shares
at $12.00 per share for proceeds of $5,000,016.
34
Management's Discussion and Analysis of Financial Condition and Results of
Operation
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operation contains "forward looking
statements." Actual results may materially differ from those projected in the
forward looking statements as a result of certain risks and uncertainties set
forth in this report. Although management believes that the assumptions made and
expectations reflected in the forward looking statements are reasonable, there
is no assurance that the underlying assumptions will, in fact, prove to be
correct or that actual future results will not be different from the
expectations expressed in this Registration Statement.
Overview
Bingo.com, Inc.
We intend to develop, through our subsidiaries, leading positions as: (1) a
niche Internet portal focused on the worldwide entertainment and lifestyle
vertical markets and (2) a market leader in on-line bingo gaming.
Each of our subsidiaries is in the process of implementing its start-up business
plan (the entertainment and lifestyle portal and the bingo gaming web site).
Our primarily focus is as a holding company and to provide legal, financial,
securities regulatory and investor relations support to our subsidiaries.
We were incorporated in the State of Florida on January 12, 1987 under the name
"Progressive General Lumber Corp." with an authorized share capital of 7,500
shares of common stock with $1.00 par value per share. On July 17, 1998, we
increased our share capital to 50,000,000 common shares with $0.001 par value,
and on January 13, 1999, we changed our name to "Bingo.com, Inc." to reflect the
focus of our business.
Bingo.com (Canada)
We organized Bingo.com (Canada) in the Province of British Columbia on February
10, 1998, as 559262 B.C. Ltd., and on February 11, 1999 changed its name to
Bingo.com (Canada) Enterprises Inc.
Bingo.com (Canada) is our wholly owned subsidiary.
Bingo.com (Canada)'s primary objective will be to provide Internet users with an
engaging vertical market focused portal site that can be easily designated by
the Internet user as their default browser and home page and a unique gateway to
the Internet's entertainment and lifestyle web-sites. We anticipate that
Bingo.com (Canada) will develop a measurable audience that will justify and
permit it to generate revenues from the sale of banner advertising and
e-commerce. The unique requirements of developing and operating a portal
requires Bingo.com (Canada) to
35
be managed by its own management team and organization principally located in
Vancouver, Canada.
During the next twelve months, Bingo.com (Canada) intends to initiate the
development of the second phase of its entertainment and lifestyle portal. We,
through Bingo.com (Canada), have spent approximately $156,250 on the development
and launch of the first phase of the entertainment and lifestyle portal.
Bingo.com (Antigua)
We incorporated Bingo.com (Antigua) under the laws of Antigua and Barbuda on
April 7, 1999 as Star Communications Ltd., and changed its name to Bingo.com.
(Antigua), Inc on April 21, 1999. The registered owners of the shares of
Bingo.com (Antigua) are Arthur G. B. Thomas of Antigua (registered owner of 9%
of the issued common shares), Kelvin John of Antigua (registered owner of 9% of
the issued common shares) and Douglas McLeod a resident of Japan (registered
owner of 82% of the issued common shares). The registered owners have executed
Trust Agreements acknowledging that we are the sole beneficial owners of the
shares and that all right, title and interest in Bingo.com (Antigua) will accrue
to and for our benefit. We intend to effect the transfer of the shares from the
registered owners to us.
Our Antigua subsidiary's primary objective is intended to be the development and
management of one of the largest on-line bingo games in the world. We anticipate
that Bingo.com (Antigua)'s on-line bingo game will incorporate dynamic design
features, surprise jackpots and prizes, chat rooms and a jackpot of up to
$1,000,000. Bingo.com (Antigua) will contribute 1% of its gross revenue from the
sale of bingo cards to charity. Bingo.com (Antigua)'s strategy will be to create
a comfortable environment to which the player will return on a regular basis to
play virtual bingo. The unique requirements of developing and operating an
Internet based gaming site will require the operations of Bingo.com (Antigua) to
be directed by a Board of Directors separate from us and to be managed by a
separate experienced management team and organization located in Antigua.
On April 16, 1999, the Antigua government granted approval for the issuance of
an Internet gaming license to Bingo.com (Antigua).
During the next twelve months, Bingo.com (Antigua) intends to establish the
infrastructure and manage and operate an on-line bingo gaming business. We,
through Bingo.com (Antigua), have spent approximately $548,000 on developing the
on-line bingo gaming business prior to the point in time that it will `go live'
at which point in time it will managed and operated by personnel located in
Antigua.
Bingo.com (Wyoming)
We intend to form Bingo.com (Wyoming) to effect a reorganization of our company.
We intend to merge into Bingo.com (Wyoming) and then continue out of Wyoming
into Antigua as an Antigua corporation with our same name, "Bingo.com, Inc."
36
Results of Operations
Bingo.com, Inc. is a holding company that owns two subsidiaries:
o Bingo.com (Canada) Enterprises Inc. is a British Columbia corporation;
and
o Bingo.com. (Antigua), Inc. is an Antigua Corporation.
We intend to organize Bingo.com (Wyoming), Inc. as a Wyoming corporation.
Bingo.com executes its primary business objectives through Bingo.com Canada and
Bingo.com Antigua (the "Operating Subsidiaries"). During the period July 1998 to
December 1998, Bingo.com was engaged in the reorganization of its corporate
structure. During the five preceding calendar reporting periods (1994 to 1998),
no material nor substantive transactions were completed by Bingo.com, or as it
was named prior thereto, Progressive General Lumber Corp. The substantive
operations of Bingo.com and its operating subsidiaries did not commence in
earnest until the first quarter of 1999.
First Quarter Ended March 31, 1999 Compared to March 31, 1998
At the end of the financial quarter ended March 31, 1999, our total assets
increased to $2,358,910 from $157,600 at December 31, 1998. The increase was due
to our completion of a $1,000,000 private placement; our investment of $183,533
(nil at December 31, 1998) primarily in office equipment and computer servers;
our acquisition of the domain name `Bingo.com' in the amount of $1,200,000 which
we paid by way of $200,000 cash and $1,000,000 by way of the issuance of 500,000
common shares (at a deemed value of $2.00 per common share); and our $500,000
investment paid by way of our commitment to issue 250,000 of our common shares
to fund the first phase of development of the portal web site. Our cash and
short-term investments were $375,206 at March 31, 1999 representing an increase
from a balance of $157,600 at December 31, 1998. This was a direct result of our
financing activities. Our current liabilities decreased to $53,070 at the end of
the financial quarter ended March 31, 1999 compared to $159,404 at December 31,
1998. This was a result of our repaying the proceeds of the cancelled private
placement that had been contemplated prior to January 1, 1999 and our
maintaining a policy in the financial quarter ended March 31, 1999 of remaining
current in our payments to our creditors.
Our general and administrative expenses increased to $192,412 while marketing
and advertising increased to $39,943 for the first financial quarter ended March
31, 1999. During the financial quarter ended March 31, 1999, we contributed
$156,250 to Bingo.com (Canada) and $548,000 to the development of the on-line
bingo gaming software.
The Bingo.com operations for the fiscal quarter ended March 31, 1999 used cash
of $4,195,000 primarily related to the funding of the acquisition of the domain
name, legal costs, staffing and office overhead expenditures.
37
The funds contributed to Bingo.com (Canada) were primarily used to fund the
development of the first phase of the portal web site, legal work, marketing and
sales, staffing and office overhead expenditures.
The funds contributed to the development of the on-line bingo gaming software
were primarily used to fund the design and alpha development phases of the
on-line bingo gaming software, marketing and sales, legal staffing and office
overhead expenditures.
During the financial quarter ended March 31, 1998, we had no active business
operations. As a result, we had no material transactions or results of
operations that require a comparison to our operations during the financial
quarter ended March 31, 1999.
Year Ended December 31, 1998 Compared to December 31, 1997
During the first half of the year ended December 31, 1998, we had no active
business operations. In July 1998, we commenced the reorganization of our
corporate structure. On July 17, 1998, the State of Florida approved our
restated Articles of Incorporation, which increased our capitalization from
7,500 common shares to 50,000,000 common shares, and changed the par value from
$1.00 to $0.001. We also forward split our common stock 200-for-1, thus
increasing the number of outstanding common shares from 5,000 common shares to
1,000,000 common shares. We incurred expenses in the amount of $6,904 during the
year ended December 31, 1998. We had no revenues from operations during the year
ended December 31, 1998.
At December 31, 1998, we had total assets of $157,600, which represented the
proceeds of a private placement that we subsequently did not accept, and which
we returned funds to the investor subsequent to the 1998 year end. We recorded
the liability for this transaction as an accounts payable.
During the year ended December 31, 1997, we had no active business operations.
As a result, we had no material transactions or results of operations that would
require a comparison to our operations during the year ended December 31, 1998.
Year Ended December 31, 1997 Compared to December 31, 1996
During the years ended December 31, 1997 and December 31, 1996, we had no active
business operations. As a result, we had no material transactions or results of
operation.
Liquidity and Capital Resources
Since July 1998, we have raised an aggregate of $ 6,075,016 in capital through
private placements. We believe this financing will be sufficient to satisfy our
cash requirements through January 31, 2000.
38
From these proceeds and until May 31, 1999, we have contributed approximately
$156,250 to Bingo.com (Canada) to pay for the product, service and software
related costs associated with the development of Bingo.com (Canada) and the
portal. This includes approximately $4,000 for legal and accounting services;
approximately $33,000 for sales and marketing activities; and approximately
$119,250 in general overhead and administrative services.
We have also expended approximately $548,000 to develop and test the on-line
bingo gaming software and for expenses related to the products and services
related to such development, which we intend to contribute to Bingo.com
(Antigua).
During the financial quarter ended March 31, 1999, we issued 500,000 common
shares to acquire the domain name `Bingo.com (at a deemed value of $2.00 per
common share). We also agreed to issue 250,000 common shares to fund the first
phase of development of the portal web site.
We estimate, however, that the total amount of capital required to proceed with
current operations and to bring our subsidiaries' products and services to
market will be approximately $10,000,000, including approximately $2,000,000 for
research and development, approximately $4,000,000 for advertising, marketing
and promotional efforts, and approximately $3,000,000 for working capital. We
anticipate that we may need to raise additional capital through additional sales
of unregistered shares of our common stock conducted under exemptions provided
by the Securities Act or by the rules of the SEC in order to meet Bingo.com's
capital requirements.
In May 1999, we closed a private placement in the amount of $5,000,016. We
believe this financing will be sufficient to satisfy Bingo.com's cash
requirements through January 31, 2000.
Recent Financings
Our business activities and operations have been funded to date through issuance
of shares of our common stock in the following transactions:
Summary of Transactions
- --------------------------------------------------------------------------------------------------------------
Number of Total Price of
Shares Shares ($)
-------------------- --------------------
Balance of Bingo.com at December 31, 1998 1,000,000 5,000
Issued to as consideration to Bingo, Inc. for the 500,000 1,000,000
Bingo.com domain name
Issued for cash at $0.01 per share 4,500,000 45,000
Issued for cash at $0.01 per share 3,000,000 30,000
Issued for cash at $2.00 per share (1) 500,000 1,000,000
Issued for cash at $12.00 per share (2) 416,668 5,000,016
-------------------- --------------------
TOTAL 9,916,688 $7,080,016
(1) We issued Units consisting of one common share and one common share
purchase warrant exercisable to acquire one additional common share at
$2.00 until February 11, 2000.
39
(2) We issued Units consisting of one common share and one common share
purchase warrant exercisable to acquire one additional common share at
$12.00 per share until April 22, 2000 and at $15.00 per share until April
22, 2001.
Year 2000 Compliance
The Year 2000 issue arises with the change in century and the potential
inability of information systems to correctly "rollover" dates to the new
century. To save on computer storage space, many systems were programmed with a
two-digit century (i.e. December 31, 1999 would appear as 12/31/99) assuming
that all years would be part of the 20th century. On January 1, 2000, systems
with this programming will default to 01/01/1900 instead of 01/01/2000, and
calculations using or reporting the date will not be correct and errors will
arise (the "Year 2000 Issue"). To prevent this from occurring, information
systems need to be updated to ensure they recognize dates during and after the
Year 2000.
The potential exists that we and each of our subsidiaries are exposed to a risk
that certain aspects of their businesses will fail or suffer impairment as a
result of internally operated or externally contracted hardware or software
systems and services not being able to correctly "rollover" dates to the new
century. The risk stems from our reliance on certain hardware, software and
services to carry out the daily operation of our proposed respective businesses.
The exposure may result from, amongst other things, the use of computers,
general software and servers for office purposes and data storage; connections
to and use of the services of Internet Service Providers and telephone companies
for office purposes and customer and investor relations; the software underlying
the operation of the portal web site and the on-line bingo gaming operation; and
the servers that `play and distribute' the on-line bingo game.
We and our subsidiaries have only been operating and developing our respective
businesses during the last 6 months and the office hardware, administrative
general software, custom developed special purpose software, servers and
services of Internet Service Providers and telephone companies have been
acquired during this period. As a result, and in consultation with the suppliers
of this hardware, software and services, we believe the related systems that we
intend, directly or indirectly, to use in our respective businesses are Year
2000 compliant. Our due diligence also included an evaluation of supplier
provided technology and the implementation of new policies to require our
suppliers to confirm that they have disclosed and will correct Year 2000
compliance issues. Although we are relying primarily on systems developed with
current technology and on systems designed to be Year 2000 compliant, we may
have to replace, upgrade or reprogram certain systems to ensure that all
interfacing technology will be Year 2000 compliant when running jointly.
In the event that we incur expenses associated with resolving Year 2000
compliance issues, we intend to expense the operating costs as they are incurred
and capitalize the capital costs as they are incurred. However, our purchases of
hardware and general and specific purpose software have been relatively recent,
and the more expensive of the hardware and general and specific software items
that we have purchased are covered under warranties that will extend over the
rollover period to January 1, 2000. As a result, we do not expect to incur any
major operating or
40
capital expenditures that would have a material impact on our financial
condition or results of operations.
While we believe that our hardware and general and specific purpose software
applications will be Year 2000 compliant, there can be no assurance until the
Year 2000 occurs that all systems will function adequately.
We do not currently anticipate any disruption in our or our subsidiaries'
operations as the result of the Year 2000 issue. We do not have any information
concerning the Year 2000 compliance status of our suppliers and customers that
would affect our operations. Any failure of our material systems, our vendors'
material systems or the Internet to be Year 2000 compliant may have a material
adverse effect on our business and results of operations.
In order to protect against the possibility of any material disruption in our or
our subsidiaries' operations as the result of the Year 2000 issue we have taken
the following precautions:
- - developed, initiated and maintained procedures that ensure that the
information stored on the office computer hard drives are backed up on a
regular basis and stored safely;
- - copies of the source code for the special purpose software are maintained
in secure offsite locations by the developers of the software;
- - will install a backup server in Antigua; and
- - implemented a policy of acquiring name brand hardware and retained
experienced consultants upon whose warranties we believe that we can rely.
New Accounting Pronouncements
In March 1997, the Financial Accounting Standards Board or FASB issued Statement
of Financial Accounting Standards SFAS No. 128, "Earnings per Share." This
Statement establishes standards for computing and presenting earnings per share
("EPS") and applies to all entities with publicly-held common shares or
potential common shares. This Statement replaces the presentation of primary EPS
and fully-diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. Basic EPS excludes dilution and is computed by dividing earnings
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Similar to fully diluted EPS, diluted EPS reflects
the potential dilution of securities that could share in the earnings. The
adoption of SFAS No. 130 did not have a material effect on our reported EPS
amounts.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which is effective for fiscal years beginning after December 15, 1997. SFAS No.
130 establishes standards for reporting and display of comprehensive income and
its components in financial statements. The adoption of SFAS No. 130 did not
have a material effect on our financial statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 establishes standards for the
way a public business enterprise reports certain
41
information about operating segments, and discloses enterprise-wide information
about its products and services, activities in different geographic areas, and
its reliance on major customers. The adoption of this Statement did not have a
material effect on our financial statements.
Statement of Financial Standards No. 132, "Employees' Disclosures About Pension
and Other Post-retirement Benefits," standardizes the disclosure requirements
for pensions and other post-retirement benefits. This statement requires
additional information on changes in benefit obligations and fair values of plan
assets. It revises prior standards and is effective for years beginning after
December 15, 1997. Because the Company does not currently have any significant
employee benefit plans nor intends to initiate any in the near-term, there
should be no impact on its financial statements.
Quantitative and Qualitative Disclosures About Market Risks
None
Item 3. Properties.
We currently lease our principal business office through our subsidiary, at
702-543 Granville Street, Vancouver, British Columbia, pursuant to a lease that
expires on April 30, 2002. The monthly rent payments under the lease are
approximately $2,380. We also pay for a pro rata share of common area expenses
such as insurance, cleaning services, maintenance related to the space we rent.
Our pro rata share of the common area expenses is currently approximately $2,120
per month.
Bingo.com (Antigua) currently leases a business office Ryan's Place, St. John's
Antigua, on a month to month basis $2,250 per month.
Other than described above, neither we nor any of our subsidiaries presently own
or lease any other property or real estate.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners.
The following table sets forth certain information concerning the number of
shares of our common stock owned beneficially as of May 15, 1999 by: (i) each
person (including any group) known to us to own more than five percent (5%) of
any class of our voting securities, (ii) each of our directors, and (iii)
officers and directors as a group. Unless otherwise indicated, the shareholders
listed possess sole voting and investment power with respect to the shares
shown.
42
- ----------------------------------------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature of Percentage of Class
Beneficial Owner Beneficial Ownership
- -------------- ------------------- ---------------------- -------------------
Common Stock Bingo, Inc. 500,000 5.04%(1)
P. O. Box 1127
The ANSA Bank Bldg.
Anguilla, B.W.I.
Common Stock Dotcom Fund SA 1,000,000(2) 9.6%(2)
Box 571
Providentials Turks &
Calcosis, B.W.I.
Common Stock Goldberg Equity Fund 833,336(3) 7.75% (3)
2001 Leeward Hwy.
Providenciales Turks &
Caicos, B.W.I.
Common Stock Michael Townsend(4) 765,000 7.71%
C/o Hong Kong Bank Bldg.
Vancouver, BC V6C3H1
Common Stock Whitecliffe Investment 585,000 5.9%
Fund, Ltd
CEGEI NI 18 STE 36 SNL 3
Cancine, MX 77500
Common Stock CEDE & Co. (5) 6,239,050(6) 62.91%
P. O. Box 222
Bowling Green Station
New York, NY 10274
Common Stock Officers and Directors as 769,500 8.02%
a Group
- ----------------------------------------------------------------------------------------------------------------
(1) Based on an aggregate 9,916,668 shares outstanding as of May 15, 1998.
(2) Includes 500,000, shares of common stock that are acquirable pursuant to
the exercise of 500,000 share purchase warrants within sixty days of May
15, 1999.
(3) Includes 416,668 shares of common stock that are acquirable pursuant to the
exercise of 416,668 share purchase warrants within sixty days of May 15,
1999.
(4) Pursuant to an assignment of a Share Purchase Agreement, the beneficial
owner of these shares is Darren Little, our President.
(5) CEDE & Co. is a trust depository that holds shares for individual
shareholders.
(6) Our transfer agent's records indicate that there are nine share
certificates registered in the name of CEDE & Co. representing 6,239,050
common shares. CEDE & Co. is a trust depository that holds shares for
individual shareholders, and we do not know the identities of the
individual shareholders of such shares.
Security Ownership of Management.
We are not aware of any arrangement that might result in a change in control in
the future.
43
Item 5. Directors and Executive Officers.
Directors and Officers
All of our directors are elected annually by the shareholders and hold office
until the next annual general meeting of shareholders or until their successors
are duly elected and qualified, unless they sooner resign or cease to be
directors in accordance with our Articles and Bylaws. Our executive officers are
appointed by and serve at the pleasure of our Board of Directors.
As at May 31, 1999, the following persons were our directors and/or executive
officers:
- --------------------------------------------------------------------------------
Name and present office held Director since
- --------------------------------------------------------------------------------
Darren Little January 1999
President, CEO, Director
- --------------------------------------------------------------------------------
Roger Flowerdew March 1999
CFO
- --------------------------------------------------------------------------------
Chris Sargent February 1999
V.P. Investor Relations
- --------------------------------------------------------------------------------
The following is a brief biographical information on each of the officers and
directors of listed:
Darren Little, Director, CEO, President, Secretary and Treasurer
Darren Little is a Director of Bingo.com, Inc. and holds the positions of
Chairman of the Board, President, Secretary and Treasurer. Previously, Mr.
Little has spent the past 15 years in management positions in the marketing and
advertising industry. He has expertise in private and public companies, such as
Realty World Corporation, and Dollar Stores with developing and implementing
marketing strategies. He develops and implements marketing and advertising
strategies that are designed to specifically increase consumer awareness and
demand for the product or service to be marketed.
Before founding Bingo.com, Little worked as Vice President of Marketing for GIC
Global Intertainment Corp. Prior to that, he was Vice President of Marketing for
Advanced Gaming Technology Inc.
44
Roger Flowerdew, Chief Financial Officer
Roger Flowerdew is a Chartered Accountant, who, has specialized in structuring
and managing the rapid growth of emerging private and high technology companies.
Flowerdew has experience in public company regulatory compliance and has
assisted in raising equity financing from institutional markets.
Prior to his joining us, Roger Flowerdew was the CFO of Xinex Networks Inc.,
from August 1992 to July 1997. He is currently a director of Zycom Corporation
and was the Executive Vice President Finance for First Cambridge Bancorp from
May 1991 to June 1992. Roger has provided financial and general management
services to companies in the telecommunications, computer based training,
emergency safety, bio-medical and environmental industries located in Canada and
the United States.
Chris Sargent, Vice President Investor Relations
Chris Sargent holds the position of Vice President Investor Relations. Mr.
Sargent has spent the past 3 years in investor relations with other companies
and with a private investor relations company. He has expertise in
communications and in public company financial markets and has developed and
implemented investor relations marketing strategies. Mr. Sargent was the Vice
President of Global Intertainment from March to December 1998; employed as an
investor relations specialist with Advance Gaming from March 1997 to March 1998
and employed as an investor relations specialist with Investor Relations Group
from March 1996 to May 1996. Mr. Sargent worked as a real estate professional at
McRae Walker Realty prior to 1996.
Other Information
The Board of Directors is elected by our shareholders. Currently, there is one
member on our Board of Directors, who reviews significant developments affecting
our company and acts on matters requiring Board approval. Although the Board of
Directors may delegate many matters to others, it reserves certain powers and
functions to itself.
None of our directors or executive officers is a party to any arrangement or
understanding with any other person pursuant to which said he was elected as a
director or officer.
None of our directors or executive officers has any family relationship with any
other officer or director.
None of our officers or directors have been involved in the past five years in
any of the following: (1) bankruptcy proceedings; (2) subject to criminal
proceedings or convicted of a criminal act; (3) subject to any order, judgment
or decree entered by any court limiting in any way his or her involvement in any
type of business, securities or banking activities; or (4) subject to any order
for violation of federal or state securities laws or commodities laws.
45
Item 6. Executive Compensation.
The following table contains information concerning the grant of stock options
to named executive officers and directors during the financial year ended
December 31, 1998. No compensation was paid to an executive officer during the
financial year ended December 31, 1998.
Our Directors do not receive any stated salary for their services as directors
or members of committees of the Board of Directors, but by resolution of the
Board, a fixed fee and expenses of attendance may be allowed for attendance at
each meeting. Directors may also serve our company in other capacities as an
officer, agent or otherwise, and may receive compensation for their services in
such other capacity.
Stock Options
We have reserved 1,145,000 shares of common stock for issuance pursuant to a
stock option plan, which we intend to authorize and adopt. We anticipate we will
issue shares to certain of our directors, executive officers and consultants
after our stock option plan is adopted. We intend to register our stock option
plan under the Securities Act after we adopt the plan and this registration
statement is declared effective.
We intend to issue stock options to the following officers, directors and
consultants after we approve and adopt a stock option plan:
- -------------------------------- -------------------------- ----------------------------- -------------------------
Grantee Number of Options Vesting Schedule Exercise Price
- -------------------------------- -------------------------- ----------------------------- -------------------------
Darren Little 500,000 3 Years, $4.75
President, CEO, Director pro rata annually
- -------------------------------- -------------------------- ----------------------------- -------------------------
Roger Flowerdew 200,000 2 Years, $4.75
CFO pro rata quarterly
- -------------------------------- -------------------------- ----------------------------- -------------------------
Chris Sargent 100,000 2 Years, $4.75
V.P. Investor Relations pro rata annually
- -------------------------------- -------------------------- ----------------------------- -------------------------
Robert MacKay 45,000 3 Months, $4.75
Consultant pro rata monthly
- -------------------------------- -------------------------- ----------------------------- -------------------------
Reserved for Issuance 500,000
- -------------------------------- -------------------------- ----------------------------- -------------------------
Total 1,145,000
- -------------------------------- -------------------------- ----------------------------- -------------------------
46
We did not granted any stock options to our executive officers and directors
during the fiscal year ended December 31, 1998.
Employment and Consulting Agreements
We currently have no employment, consulting or other service contracts or
arrangements between us or our subsidiaries and our directors and/or executive
officers.
Item 7. Certain Relationships and Related Transactions.
Except for relationships and transactions that we have disclosed in other
sections of this registration statement such as (a) the ownership of our
securities, (b) the compensation described herein and (c) advances to and by
certain officers to cover expenses, all of which were reimbursed or repaid
without interest, none of our directors, executive officers, holders of ten
percent of our outstanding shares of common stock, or any associate or affiliate
of such person, have, to our knowledge, had a material interest, direct or
indirect, during the three fiscal years ended December 31, 1996, 1997 and 1998
or in any proposed transaction which may materially affect us.
Item 8. Legal Proceedings.
To the best of our knowledge, we are not subject to any active or pending legal
proceedings or claims against us or any of our properties. However, from time to
time, we may become subject to claims and litigation generally associated with
any business venture.
Item 9. Market Price of and Dividends on Registrant's Common Equity and Related
Stockholder Matters.
On March 19, 1997, our common stock was approved for trading on the OTCBB under
the symbol PGLB. In January 1999, we changed our name from Progressive General
Lumber Corporation to Bingo.com, Inc., and our OTCBB symbol was changed to BIGG.
The following table sets forth, for the periods indicated, the range of the high
and low bid quotations (as reported by NASD). There were no trades of our
securities on the OTCBB prior to the first quarter 1999.
The bid quotations set forth below, reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not reflect actual transactions:
47
OTCBB
1999 High Low Volume
---- ---- --- ------
1st Quarter 8.75 1.875 6,404,500
On June 3, 1999, the last reported sales price of our common stock, as reported
by the NASD was $3.93. As of May 15, 1999, there were 76 holders of record of
our common stock.
We have not declared or paid any cash dividends on our common stock since our
inception, and our Board of Directors currently intends to retain all earnings
for use in the business for the foreseeable future. Any future payment of
dividends will depend upon our results of operations, financial condition, cash
requirements and other factors deemed relevant by our Board of Directors.
Item 10. Recent Sales of Unregistered Securities.
Pursuant to a resolution dated June 30, 1988, we initially issued 5,000 shares
of common stock (the "Original Shares"). On July 17, 1998, we increased our
authorized share capital from 7,500 authorized shares of common stock to
50,000,000 shares of common stock. Pursuant to the resolution authorizing the
increase in authorize share capital, our board of directors of Bingo.com
declared a stock dividend (a forward split) that increased our number of
Original Shares on a 200-for-1 basis, resulting in 1,000,000 outstanding common
shares. The issuance of Original Shares was exempt from registration under the
provisions of Section 4(2) of the Securities Act of 1933, as amended. The
issuance of the shares did not involve a public offering.
We issued 3,000,000 shares of our common stock for $0.01 per share to raise
$30,000. This offering was made to four subscribers and was fully subscribed and
the shares were issued on January 12, 1999. The offering was not underwritten.
This sale was exempt from registration in reliance upon Rule 504 under
Regulation D promulgated under the Securities Act. The aggregate offering price
did not exceed $1,000,000, and the offering was otherwise in compliance with
Rules 501 and 502 promulgated under the Securities Act.
We issued 4,500,000 shares of our common stock for $0.01 per share to raise
$45,000. This offering was made to seven subscribers and was fully subscribed
and the shares were issued in January 1999. The offering was not underwritten.
This sale was exempt from registration in reliance upon Rule 504 under
Regulation D promulgated under the Securities Act. The aggregate offering price
did not exceed $1,000,000, and the offering was otherwise in compliance with
Rules 501 and 502 promulgated under the Securities Act.
Pursuant to an Asset Purchase Agreement dated January 18, 1999, we issued
500,000 shares of our common stock to Bingo.com, Inc. as consideration for the
acquisition of the domain name "Bingo.com." The shares were issued in reliance
on an exemption from registration pursuant to
48
Section 4(2) of the Securities Act of 1933 and Regulation S promulgated under
the Securities Act. No placement agent was retained in connection with the
issuance and no fees or commissions were paid in connection with the
transaction. The shares issued to Bingo.com are subject to an Escrow Agreement
dated January 27, 1999, under which the shares held in escrow pending
confirmation of the transfer of the domain name, "Bingo.com".
Pursuant to a Subscription Agreement dated February 12, 1999, we issued units
consisting of one common share and one common share purchase warrant for $2.00
per unit to raise $1,000,000. Each share purchase warrant is exercisable to
acquire one additional common share at $1.00 per share until February 11, 2000.
This offering was made to one subscriber outside the United States. The offering
was not underwritten. The shares were issued on an exemption from registration
pursuant to Regulation S promulgated under the Securities Act. No placement
agent was retained in connection with the offering and no fees or commissions
were paid in connection with the transaction.
Pursuant to a Subscription Agreement dated April 23, 1999, we issued units
consisting of one common share and one common share purchase warrant for $12.00
per unit to raise $5,000,016. Each share purchase warrant is exercisable to
acquire one additional common share at $12.00 per share until April 22, 2000 and
at $15.00 per share until April 22, 2001. This offering was made to one
subscriber outside the United States. The offering was not underwritten. The
shares were issued in reliance on an exemption from registration pursuant to
Regulation S promulgated under the Securities Act. No placement was retained in
connection with the offering and no fees or commissions were paid in connection
with the transactions.
Item 11. Descriptions of Registrant's Securities to be Registered.
Pre-reorganization - Bingo.com (Florida)
Our authorized capital stock consists of 50,000,000 shares of common stock, par
value $0.001 per share. As of May 15, 1999, there were 9,916,668 issued and
outstanding shares of our common stock. On May 15, 1999, there were 76 holders
of record of common stock.
We have also agreed to issue 250,000 shares of our common stock to Stratford as
consideration for services related to the first phase of the development of the
Bingo.com (Canada) portal. We anticipate we will finalize a definitive agreement
with Stratford in June 1999 and issue the shares at closing.
Each of our stockholders is entitled to one vote for each share of common stock.
All elections for directors are decided by plurality vote; all other questions
are decided by majority vote except as may otherwise be provided by our Articles
of Incorporation or by the Florida General Corporation Law.
The holders of our common stock are not entitled to cumulative voting rights
with respect to the election of directors, and as a consequence, minority
stockholders will not be able to elect directors on the basis of their votes
alone. Our stockholders are entitled to receive ratably such dividends as may be
declared by our Board of Directors out of funds legally available therefor.
49
In the event of a liquidation, dissolution or winding up of the company, our
stockholders are entitled to share ratably in all assets remaining after payment
of liabilities. Our stockholders have no preemptive rights and no right to
convert their common stock into any other securities. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of our common stock are fully paid and non-assessable.
Post Reorganization Rights and Analysis
We anticipate it will be reorganized pursuant to a plan of reorganization. The
reorganization will be accomplished through the merger of us with and into a
wholly owned Wyoming subsidiary we will form to facilitate the reorganization.
We anticipate that each of our outstanding shares of common stock will, subject
to the exercise of statutory dissenters' rights, be automatically converted into
one outstanding share of the Wyoming Corporation's common stock, and that
immediately after the merger, the Wyoming Corporation will become Bingo.com,
Inc., an Antigua international business corporation.
Comparison of Your Rights as a Shareholder now and After the Reorganization
Florida law and our Articles of Incorporation and Bylaws govern your rights as a
stockholder of our stock. After the reorganization you will become a stockholder
of an Antigua International Business Corporation (unless you dissent) and the
Antigua International Business Corporation Act or the "IBCA", our Articles of
Continuance and our new Bylaws will govern your rights.
The principal attributes of your shares of our common stock and our shares after
the reorganization will be similar; however, there will be certain differences.
In addition, there are certain differences between our current Articles of
Incorporation and Bylaws, and our Articles of Continuance and Bylaws after
reorganization. The following discussion is a summary of all material
differences in your stockholder rights resulting from the reorganization, but
does not and covers all of the respects in which Antigua law may differ from
laws generally applicable to Florida corporations. You should review the
complete text of the relevant provisions of the Antigua IBCA, the Florida
Business Corporation Act or the "FBCA", our Articles of Incorporation and Bylaws
and our proposed Articles of Continuance and Bylaws.
50
Stockholder Approval of Business Combinations
Under the FBCA, there is no statutory restriction on a Florida corporation's
ability to acquire the business of another corporation. However, a merger or
consolidation, sale, lease, exchange or other disposition of all or
substantially all of the property of the corporation a "Disposition" not in the
usual and regular course of the corporation's business, or a dissolution of the
corporation, is required to be approved by the holders of a majority of the
shares entitled to vote thereon unless the Articles of Incorporation provides
otherwise. In addition, under the FBCA, class-voting rights exist with respect
to amendments to the Articles of Incorporation that adversely affect the terms
of the shares of a class. Such class voting rights do not exist as to other
extraordinary matters, unless the certificate of incorporation provides
otherwise; our Articles of Incorporation do not provide otherwise.
The IBCA requires the approval of the holders of at least two-thirds (2/3) of
the votes cast at a special meeting called for such purpose for Bingo.com
(Holding) to (i) merge, consolidate or amalgamate with another company or (ii)
reorganize or reconstruct itself pursuant to a plan sanctioned by the Antigua
courts.
Absence of Required Vote for Certain Mergers
Under the FBCA, no vote of the stockholders of a corporation surviving a merger
is required to approve a merger if (i) the agreement of merger does not amend
the Articles of Incorporation of such corporation, (ii) each share of stock of
such corporation outstanding immediately before the merger is to be an identical
outstanding or treasury share of the surviving corporation with identical
designations, preferences, limitations and relative rights.
There is no equivalent provision in the IBCA and therefore the stockholders of
the surviving company in such a situation would be entitled to vote on the
merger as described above.
Appraisal Rights
Under the FBCA, a stockholder of a corporation does not have appraisal rights in
connection with a merger or consolidation or, in the case of a disposition, if
(i) the shares of such corporation are listed on a national securities exchange
or held of record by more than 2,000 stockholders, as is presently not the case
with our company, or (ii) such corporation will be the surviving corporation of
the merger and no vote of the stockholders of the surviving corporation is
required to approve such merger; provided, however, that a stockholder is
entitled to appraisal rights in the case of a merger or consolidation if such
stockholder is required by the terms of an agreement of merger or consolidation
to accept in exchange for the shares of such stockholder anything other than (i)
shares of stock of the corporation surviving or resulting from such merger or
consolidation, (ii) shares of any other corporation that on the effective date
of the merger or consolidation will be either listed on a national securities
exchange or held of record by more
51
than 2,000 stockholders, (iii) cash in lieu of fractional shares of the
corporation described in the foregoing clauses (i) and (ii), or (iv) any
combination of the foregoing.
The IBCA does not provide for appraisal rights. However, in the case of a court
sanctioned reorganization of an Antigua company as described above, a dissenting
stockholder has the right to express to the court such stockholder's view that
the transaction sought to be approved would not provide the stockholders with
the fair value of their shares.
Stockholder Consent to Action Without Meeting
Under the FBCA, unless otherwise provided in the Articles of Incorporation, any
action that can be taken at a meeting of the stockholders may be taken without a
meeting if written consent thereto is signed by the holders of outstanding stock
having the minimum number of votes necessary to authorize or take such action at
a meeting of the stockholders.
There is no equivalent provision under the IBCA. However, Articles of
Continuance may provide that a resolution in writing signed by all of the
stockholders entitled to vote thereon at a meeting of stockholders is as valid
as if that resolution had been approved at a meeting of the stockholders.
Special Meetings of Stockholders Under the FBCA, a special meeting of
stockholders may be called only by the board of directors or by persons
authorized in our Articles of Incorporation or the Bylaws. Our Bylaws provide
for the call of a special meeting of stockholders by our President or Secretary,
or by resolution of our Board of Directors.
Under the IBCA, a special meeting will be able to be called by the Board of
Directors or by the holders of not less than five percent (5%) of the issued
shares of a corporation that carry the right to vote at the meeting sought to be
held.
Distributions and Dividends; Repurchases and Redemptions
Under the FBCA, a corporation may pay dividends out of surplus and, if there is
no surplus, out of net profits for the current and/or the preceding fiscal year,
unless the net assets of the corporation are less than the capital represented
by issued and outstanding stock having a preference on asset distributions.
Surplus is defined in the FBCA as the excess of the net assets over capital, as
the board may adjust such capital. A Florida corporation may purchase or redeem
shares of any class except when its capital is impaired or would be impaired by
such purchase or redemption. A corporation may, however, purchase or redeem out
of capital shares that are entitled upon any distribution of its assets to a
preference over another class or series of its stock if such shares are to be
retired and the capital reduced. Under the IBCA, the directors may pay to the
stockholders such dividends as appear to the directors to be justified by the
profits of the Corporation unless the corporation is unable or would, after the
payment, be unable to pay its liabilities as they become due, or the realizable
52
value of the corporation's assets would thereby be less than the aggregate of
its liabilities and stated capital of all classes.
Vacancies on Board of Directors
Under the FBCA, a vacancy and a newly created directorship may be filled by a
majority of the remaining directors, although less than a quorum, unless
otherwise provided in the Articles of Incorporation or Bylaws. Neither our
Articles of Incorporation nor our Bylaws provides otherwise so.
The IBCA and our proposed Bylaws after the reorganization will provide that a
vacancy and a newly created directorship may be filled by a majority of the
remaining directors, so long as a quorum of directors continues to exist at all
times.
Removal of Directors
Under the FBCA, except in the case of a corporation with a classified board, any
director or the entire board may be removed, with or without cause, by the
holders of a majority of the shares entitled to vote at an election of
directors.
The IBCA provides that directors may be removed by the affirmative vote of the
holders of at least a majority of the outstanding shares entitled to vote.
Inspection of Books and Records
Under the FBCA, any stockholder may inspect the corporation's books and records
for a proper purpose.
Shareholders of an Antigua corporation may inspect or obtain copies of the list
of shareholders, corporate records or financial statements.
Amendment of Articles of Incorporation
Under the FBCA, our Articles of Incorporation may be amended if (i) the board of
directors sets forth the proposed amendment in a resolution, declares the
advisability of the amendment and directs that it be submitted to a vote at the
meeting of stockholders and (ii) the holders of at least a majority of shares of
stock entitled to vote thereon approve the amendment, unless the Articles of
Incorporation requires the vote of a greater number of shares. If the holders of
the outstanding shares of a class are entitled to vote as a class upon a
proposed amendment, the holders of a majority of the outstanding shares of such
class must also vote in favor of the amendment.
Amendment of Bylaws
Under the FBCA, our Board of Directors may amend our Bylaws as our Articles of
Incorporation authorize such amendment. Our stockholders also have the power to
amend our Bylaws.
53
Under the IBCA, our Bylaws after the reorganization may only be amended by a
special resolution.
Indemnification of Directors and Officers
The IBCA and the FBCA have different provisions and limitations regarding
indemnification by a corporation of its officers, directors, employees and
agents. If the reorganization is approved, the IBCA indemnification provisions
will not apply to any act or omission that occurs before the reorganization. The
following is a summary comparison of the IBCA and FBCA indemnification
provisions:
Under the FBCA, indemnification rights are expressly non-exclusive. A
corporation is permitted to provide indemnification or advancement of expenses,
by bylaw provisions, agreement or otherwise, against judgments, fines, expenses
and amounts paid in settlement actually and reasonably incurred by the person in
connection with such proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. Our Articles of Incorporation and Bylaws make indemnification
mandatory on the part of our Officers and Directors to the fullest extent
permitted by law.
Antigua law does not limit the extent to which a corporation's Articles of
Incorporation and/or Bylaws may provide for the indemnification of officers and
directors, except to the extent that such provision may be held by the Antigua
courts to be contrary to public policy (for instance, for purporting to provide
indemnification against the consequences of committing a crime). In addition, an
officer or director may not be indemnified for his own dishonesty or willful
neglect or default.
Our Articles of Continuance are anticipated to contain provisions providing for
the indemnity of our officers, directors, employee and agents to the same extent
as permitted under our Articles of Incorporation.
Limited Liability of Directors
The FBCA permits the adoption of Articles of Incorporation provisions limiting
or eliminating the monetary liability of a director to a corporation or its
stockholders by reason of a director's breach of the fiduciary duty of care. The
FBCA does not permit any limitation of the liability of a director for (i)
breaching the duty of loyalty to the corporation or its stockholders, (ii)
failing to act in good faith, (iii) engaging in intentional misconduct or a
known violation of law, (iv) obtaining an improper personal benefit from the
corporation or (v) paying a dividend or approving a stock repurchase that was
illegal under the FBCA. Our Articles of Incorporation eliminates the monetary
liability of a director to the fullest extent permitted by the FBCA.
There is no equivalent provision under the IBCA.
54
Stockholders' Suits
The FBCA requires only that the stockholder bringing a derivative suit must have
been a stockholder at the time of the wrong complained of or that the stock
devolved to him by operation of law from a person who was such a stockholder. In
addition, the stockholder must remain a stockholder throughout the litigation.
Under of the IBCA a complainant may, for the purpose of prosecuting, defending
or discontinuing an action on behalf of a corporation, apply to an Antigua court
for leave to bring an action in the name and on behalf of the corporation or any
of its subsidiaries, or intervene in an action to which any such corporation or
any of its subsidiaries is a party. However, no derivative action may be brought
and no intervention may be made unless the court is satisfied (i) that the
complainant has given reasonable notice to the directors of the corporation or
its subsidiary of his intention to apply to the court if the directors of the
corporation or its subsidiary do not bring, diligently prosecute or defend or
discontinue the action, (ii) that the complainant is acting in good faith and
(iii) that it appears to be in the interest of the corporation or its subsidiary
that the action be brought, prosecuted, defended or discontinued.
Rights of Dissenting Stockholders
General
Our stockholders who follow the procedures specified in the FBCA will be
entitled to have their shares of common stock appraised and to receive payment
of the "fair value" of such shares, exclusive of any element of value arising
from the accomplishment or expectation of the reorganization, as determined by a
Florida court of competent jurisdiction. In order to take advantage of such
rights, the procedures set forth in the dissenter's rights provisions of the
FBCA must be strictly followed. Failure to comply with any of the procedures may
result in a termination or waiver of appraisal rights.
The following is a summary of FBCA ss.607.1320 the dissenter's rights provision.
Under FBCA ss.607.1320, a stockholder of Bingo.com (Florida) electing to
exercise appraisal rights must both:
(1) Deliver to us (or effectively our resolution Antigua Corporation
within 20 days after the date of approval of the reorganization, a
written demand for appraisal of his shares which reasonably informs us
of the identity of the stockholder of record and that such record
stockholder intends thereby to demand the appraisal of his shares; and
(2) Not approve or vote in favor of the proposal relating to the
reorganization.
The written demand for appraisal must be made by or for you in your registered
name.
55
Within 120 days after the date of the reorganization, we or any stockholder who
has satisfied the foregoing conditions and is otherwise entitled to appraisal
rights under FBCA ss.607.1320, may file a petition in the Florida court of
competent jurisdiction demanding a determination of the fair value of the shares
of held by all stockholders entitled to appraisal rights. If no such petition is
filed, appraisal rights will be lost for all stockholders who had previously
demanded appraisal of their shares.
Within 120 days after the date of the reorganization, any dissenting stockholder
who has complied with the provisions of FBCA ss.607.1320 is entitled, upon
written request, to receive from us, a statement setting forth the aggregate
number of shares of not voted in favor of adoption of the reorganization with
respect to which demands the appraisal we received, and the number of holders
seeking appraisal. The statement must be mailed within 10 days after we receive
the written request or within 10 days after expiration of the time for delivery
of demands for appraisal under FBCA ss.607.1320, whichever is later.
If a petition for an appraisal is timely filed, after a hearing on such petition
the court will determine who is entitled to appraisal rights and will appraise
the value of the common stock owned by these stockholders, determining its "fair
value" exclusive of any element of value arising from the accomplishment or
expectation of the reorganization. The Court will direct us to pay the fair
value of such shares together with a fair rate of interest, if any. A
stockholder may also request the Court to order that all or a portion of the
expenses incurred in connection with an appraisal proceeding, including,
reasonable attorneys' fees and the fees and expenses of experts, be charged pro
rata against the value of all the shares entitled to appraisal.
Item 12. Indemnification of Directors and Officers.
Our Bylaws require us to indemnify to the fullest extent permitted by law each
person that is empowered by law to indemnify. Our Articles of Incorporation
require us to indemnify to the fullest extent permitted by Florida law, each
person that we have the power to indemnify.
Florida law permits a corporation, under specified circumstances, to indemnify
its directors, officers, employees or agents against expenses (including
attorney's fees), judgments, fines and amounts paid in settlements actually and
reasonably incurred by them in connection with any action, suit, or proceeding
brought by third parties by reason of the fact that they were or are directors,
officers, employees or agents of the corporation, if such directors, officers,
employees or agents acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reason to believe their
conduct was unlawful. In a derivative action, i.e. one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers,
56
employees or agents are fairly and reasonably entitled to indemnity for such
expenses despite such adjudication of liability.
Our Articles of Incorporation and Bylaws also contain provisions stating that no
director shall be liable to us or any of our stockholders for monetary damages
for breach of fiduciary duty as a director, except with respect to (1) a breach
of the director's duty of loyalty to the corporation or its stockholders, (2)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) liability under Florida law (for unlawful payment
of dividends, or unlawful stock purchases or redemptions) or (4) a transaction
from which the director derived an improper personal benefit. The intention of
the foregoing provisions is to eliminate the liability of our directors or our
stockholders to the fullest extent permitted Florida law.
There is no equivalent provision under the IBCA.
Item 13. Financial Statements and Supplementary Data.
Not Applicable.
Item 14. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
Item 15. Financial Statements and Exhibits.
The following financial statements and related schedules are included in this
Item:
(a) Financial Statements
Auditors' Report
Progressive General Lumber Corp. Consolidated Balance Sheets as at
December 31, 1998 and 1997.
Progressive General Lumber Corp. Consolidated Statements of Income and
Deficit for the years ended December 31, 1998, 1997 and 1996.
Progressive General Lumber Corp. Consolidated Statements of Changes in
Financial Position for the years ended December 31, 1998, 1997 and
1996.
Notes to Consolidated Financial Statements.
57
Bingo.com, Inc. (formerly Progressive General Lumber Corp.)
Consolidated Balance Sheets as at March 31, 1999 and 1998.
Bingo.com, Inc. (formerly Progressive General Lumber Corp.)
Consolidated Statements of Income and Deficit for the period ended
March 31, 1999 and 1998.
Bingo.com, Inc. (formerly Progressive General Lumber Corp.)
Consolidated Statements of Changes in Financial Position for the
periods ended March 31, 1999 and 1998.
(b) Exhibits
Exhibit Number Description
- -------------- ------------------------------------------------------------
3.1 Articles of Incorporation of Progressive Lumber Corp.
effective January 12, 1987.
3.2 Articles of Amendment to Progressive Lumber Corp. filed on
July 17, 1998.
3.3 Articles of Amendment to Progressive Lumber Corp. effective
January 22, 1999.
3.4 Bylaws of Bingo.com, Inc.
10.1 Form of Stock Subscription Agreement dated December 1998.
10.2 Asset Purchase Agreement by and between Bingo, Inc. and
Progressive Lumber, Corp. dated January 18, 1999.
10.3 Escrow Agreement by and among Bingo.com, Inc., Bingo, Inc.
and Clark, Wilson dated January 27, 1999.
10.4 Registrant Name Change Agreement by and among Network
Solutions, Bingo, Inc. and Bingo.com, Inc. dated January
1999.
58
Exhibit Number Description
- -------------- ------------------------------------------------------------
10.5* Lease Agreement by and between Harwood Corporation and
Bingo.com (Canada) Enterprises Inc. & 559262 B.C. Ltd.
commencing February 1, 1999.
10.6 Development Agreement by and between Stratford Internet
Technologies Inc. and Bingo.com, Inc. dated February 17,
1999.
10.7 Private Placement Subscription Agreement by and between
Bingo.com, Inc. and Dotcom Fund, S.A. dated February 11,
1999.
10.8 Share Purchase Warrant issued to Dotcom Fund, S.A. dated
February 12, 1999.
10.9* Application and Agreement for Merchant Services by and
between State Communications Ltd. and Global Payment
Services dated April 21, 1999.
10.10 Subscription Agreement by and between Bingo.com, Inc. and
Goldberg Equity Fund dated April 23, 1999.
10.11 Share Purchase Warrant issued to Goldberg Equity Fund dated
April 23, 1999.
10.12 Declaration of Trust made by Douglas Albert Lorne McLeod
dated May 1999.
21.1 List of Subsidiaries of Registrant
* To be filed by amendment
59
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
(Expressed in United States Dollars)
DECEMBER 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
Progressive General Lumber Corp.
(A Development Stage Company)
We have audited the balance sheet of Progressive General Lumber Corp. as at
December 31, 1998 and the statements of operations, stockholders' deficiency and
cash flows for the year then ended and the cumulative amounts from incorporation
on January 12, 1987 to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as at December 31, 1998 and the
results of its operations and stockholders' deficiency and its cash flows for
the year then ended and the cumulative amounts from incorporation on January 12,
1987 to December 31, 1998 in accordance with generally accepted accounting
principles in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 1 to the financial
statements, the Company has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
The audited financial statements as at December 31, 1997 and 1996 and for the
years then ended were examined by another auditor who expressed an opinion
without reservation on those statements in his report dated August 3, 1998.
Vancouver, Canada Chartered Accountants
March 17, 1999
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
BALANCE SHEETS
(Expressed in United States Dollars)
AS AT DECEMBER 31
============================================================================================================================
1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
Cash (Note 3) $ 157,600 $ -
============================================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current
Accounts payable (Note 3) $ 159,404 $ -
------------- ------------
Stockholders' deficiency
Capital stock
Authorized
50,000,000 common shares with a par value of $0.001 (December 31,
1997 - 7,500 common shares with
a par value of $1.00)
Issued
1,000,000 shares (December 31, 1997 - 5,000 shares) 1,000 5,000
Additional paid in capital 4,000 -
Deficit accumulated during the development stage (6,804) (5,000)
------------- -------------
(1,804) -
------------- ------------
$ 157,600 $ -
============================================================================================================================
Subsequent events (Note 4)
The accompanying notes are an integral part of
these financial statements.
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Expressed in United States Dollars)
============================================================================================================================
Cumulative
Amounts from
Incorporation
on January 12,
1987 to Years Ended December 31
December 31,
1998 1998 1997 1996
---- ---- ---- ----
INTEREST INCOME $ 100 $ 100 $ - $ -
EXPENSES
General, selling and administrative 6,904 1,904 - -
--------------- -------------- -------------- -------------
Net loss for the period $ (6,804) $ (1,804) $ - $ -
============================================================================================================================
Net loss per share (Note 2) $ - $ - $ - $ -
============================================================================================================================
Weighted average number of common
shares outstanding 1,000,000 1,000,000 5,000 5,000
============================================================================================================================
The accompanying notes are an integral part of
these financial statements.
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
(Expressed in United States Dollars)
============================================================================================================================
Deficit
Accumulated
Capital Stock Additional During the
------------------------------- Paid-in Development
Shares Amount Capital Stage Total
- ----------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 5,000 $ 5,000 $ - $ (5,000) $ -
Loss for the year - - - - -
-------------- -------------- -------------- -------------- ------------
Balance, December 31, 1996 5,000 5,000 - (5,000) -
Loss for the year - - - - -
-------------- -------------- -------------- -------------- ------------
Balance December 31, 1997 5,000 5,000 - (5,000) -
July 17, 1998 changed par value
from $1.00 to $0.001 - (4,995) 4,995 - -
July 17, 1998 forward stock split 200:1 995,000 995 (995) - -
Loss for the year - - - (1,804) (1,804)
-------------- -------------- -------------- -------------- -------------
Balance, December 31, 1998 1,000,000 $ 1,000 $ 4,000 $ (6,804) $ (1,804)
============================================================================================================================
The accompanying notes are an integral part of
these financial statements.
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Expressed in United States Dollars)
============================================================================================================================
Cumulative
Amounts from
Incorporation
on January 12,
1987 to Years Ended December 31
December 31,
1998 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the period $ (6,804) $ (1,804) $ - $ -
Adjustment to reconcile net loss to net cash
provided by operating activities - - - -
Change in non-cash working capital items
Increase in accounts payable 164,404 159,404 - -
--------------- -------------- ------------- ------------
Net cash provided by operating activities 157,600 157,600 - -
--------------- -------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES - - - -
--------------- -------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES - - - -
--------------- -------------- ------------- ------------
Change in cash position for the period - - - -
Cash, beginning of period - - - -
--------------- -------------- ------------- ------------
Cash, end of period $ 157,600 $ 157,600 $ - $ -
============================================================================================================================
The accompanying notes are an integral part of
these financial statements.
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (Expressed in
United States Dollars)
DECEMBER 31, 1998
================================================================================
1. HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized January 12, 1987, under the laws of the State of
Florida as Progressive General Lumber Corp. The Company currently has no
operations and, in accordance with SFAS #7, is considered a development
stage company.
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company has no current source
of revenue. Without realization of additional capital, it would be unlikely
for the Company to continue as a going concern. It is management's plan to
seek additional capital through private placements.
On July 17, 1998, the State of Florida approved the Company's restated
Articles of Incorporation, which increased its capitalization from 7,500
common shares to 50,000,000 common shares. The par value was changed from
$1.00 to $0.001.
On July 17, 1998, the Company forward split its common stock 200:1, thus
increasing the number of outstanding common stock shares from 5,000 shares
to 1,000,000 shares.
2. SIGNIFICANT ACCOUNTING POLICIES
Foreign currency translation
Transaction amounts denominated in foreign currencies are translated into
local functional currency at exchange rates prevailing at transactions
dates. Carrying values of monetary assets and liabilities are adjusted at
each balance sheet date to reflect the exchange rate at that date. Gains
and losses from restatement of foreign currency monetary assets and
liabilities are included in income.
Stock-based compensation
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at
fair value. The Company has chosen to account for stock-based compensation
using Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees." Accordingly compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee is required to
pay for the stock.
Taxes on income
The Company accounts for income taxes under an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for
expected future tax consequences of events that have been recognised in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events
other than enactment's of changes in the tax laws or rates.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenues and expenses
during the year. Actual results could differ from these estimates.
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (Expressed in
United States Dollars)
DECEMBER 31, 1998
================================================================================
2. SIGNIFICANT ACCOUNTING POLICIES (cont'd.....)
Loss per share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"). Under FAS 128, basic and diluted earnings per share are to be
presented. Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number of common
shares outstanding in the period. Diluted earnings per share takes into
consideration common shares outstanding (computed under basic earnings per
share) and potentially dilutive common shares. FAS 128 is effective for
interim and annual financial statements ending after December 15, 1997.
New accounting standards
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," is effective for years beginning after December 15,
1997. The primary objective of this statement is to report and disclose a
measure ("Comprehensive Income") of all changes in equity of a company that
result from transactions and other economic events of the period other than
transactions with owners. The Company does not anticipate that the
statement will have a significant impact on its future financial
statements.
Statement of Financial Accounting Standards No. 131, "Disclosure About
Segments of an Enterprise and Related Information," is effective for years
beginning after December 15, 1997. This statement requires use of the
"management approach" model for segment reporting. The management approach
model is based on the way a company's management organizes segments within
the company for making operating decisions and assessing performance.
Reportable segments are based on products and services, geography, legal
structure, management structure, or any other manner in which management
dissaggregates a company. The Company does not anticipate that the adoption
of the statement will have a significant impact on its financial statements
other than potentially providing more financial statement disclosures.
Statement of Financial Standards No. 132, "Employees' Disclosures About
Pensions and Other Post-retirement Benefits," standardizes the disclosure
requirements for pensions and other post-retirement benefits. This
statement requires additional information on changes in benefit obligations
and fair values of plan assets. It revises prior standards and is effective
for years beginning after December 15, 1997. Because the Company does not
currently have any significant employee benefit plans nor intends to
initiate any in the near-term, there should be no impact on its financial
statements.
3. CASH
The amount of $157,500 represents amounts payable to third parties is
included in accounts payable, and was paid subsequent to year end.
4. SUBSEQUENT EVENTS
i) Intangible asset - domain name rights
On January 18, 1999, the Company finalized an agreement to purchase the
domain name www.bingo.com. The Company is in the process of arranging for
the domain name to be transferable to the Company at the Domain Name
Registry maintained by Network Solutions, Inc. The agreement allowed the
Company to change it's name to Bingo.com Inc.. The purchase was financed as
follows:
o $200,000 cash (paid), plus
o 500,000 common shares of the Company (issued), plus
o ongoing quarterly royalty payments equal to 4% of the Company's gross
revenues, with a total minimum guarantee of $1,100,000.
PROGRESSIVE GENERAL LUMBER CORP.
(A Development Stage Company) NOTES TO THE FINANCIAL STATEMENTS (Expressed in
United States Dollars)
DECEMBER 31, 1998
================================================================================
4. SUBSEQUENT EVENTS (cont'd.....)
ii) Equity funding
The Company completed a financing under Regulation D, Rule 504, by
issuing 7,500,000 common shares for proceeds of $75,000 on January 7,
1999. In February, 1999, the Company completed Phase I of its
financing requirements with a $1,000,000 private placement of 500,000
units, each consisting of one common share and one common share
purchase warrant at a price of $2.00 per unit. The warrants are
exercisable at a price of $2.00, for a period of one year.
iii) Stock options and warrants
In February, 1999, the Company reserved a total of 1,145,000 options
and granted a total of 595,000 options, exercisable at $4.75 per
share, to certain employees and advisors of the Company.
iv) Name change
The Company underwent a change of control in January, 1999 and changed
its name to Bingo.com Inc. on January 22, 1999.
v) The Company has entered into a preliminary agreement to assist in the
design and implementation of the Company's Web site. The Company will
issue 250,000 shares as payment of fees incurred in providing the
consulting services referred to in the agreement.
5. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO OPERATING, FINANCING AND INVESTING
ACTIVITIES
There were no non-cash transactions for the years ended December 31, 1998,
1997 or 1996. Prior to December 31, 1996, the Company issued 5,000 common
shares for services received.
Bingo.com Inc.
(formerly Progressive General Lumber Corp.)
CONSOLIDATED FINANCIAL STATEMENTS
as at March 31, 1999
unaudited
Bingo.com Inc
(formerly Progressive General Lumber Corp.)
CONSOLIDATED BALANCE SHEETS
as at
March 31, December 31,
1999 1998
(unaudited) (audited)
----------- ---------
ASSETS
Current
Cash and cash equivalents ........................................... $ 375,206 $ 157,600
Accounts receivable (allowance - nil) ............................... 15,340 --
Prepaid expenses .................................................... 4,299 --
394,845 157,600
----------- -----------
Equipment
Office .............................................................. 48,579 --
Gaming .............................................................. 134,954
Less: - accumulated depreciation .................................... -- --
----------- -----------
183,533 --
Other
Security deposits ................................................... 18,192 --
Software development ................................................ 562,340 --
Domain Name rights (note 2 .......................................... 1,200,000
-----------
1,780,532 --
----------- -----------
Total assets ........................................................ $ 2,358,910 $ 157,600
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Accounts payable .................................................... $ 48,891 $ 159,404
Accrued liabilities
Salaries, and other compensation ................................. 4,179 --
Other ...........................................................
----------- -----------
53,070 159,404
----------- -----------
Stockholders' Equity
Common stock - $0.001 par value
authorized 50,000,000 shares;
issued and outstanding 9,500,000 ................................. 9,500 1,000
Additional paid - in capital ........................................ 2,061,857 4,000
Shares allotted for issue ........................................... 500,000 --
Accumulated deficit ................................................. (265,517) (6,804)
----------- -----------
2,305,840 (1,804)
----------- -----------
$ 2,358,910 $ 157,600
=========== ===========
Bingo.com Inc
(formerly Progressive General Lumber Corp.)
CONSOLIDATED STATEMENTS OF OPERATIONS
for the periods ended
March 31, December 31,
1999 1998
3 months (12 months)
(unaudited) (audited)
----------- ---------
Revenues .............................................................. $ -- $ --
Expenses
General and administrative . ..................................... 192,412 1,804
Marketing and advertising .. ..................................... 39,943
----------- ----------
Operating loss .................. ..................................... (232,355) (1,804)
Other expense
Foreign exchange adjustments ..................................... (21,105)
Interest ................... ..................................... (5,253) ---------
Net loss ........................ ..................................... $ (258,713) $ (1,804)
========= =========
Accumulated deficit
Beginning .................. ..................................... $ (6,804) $ (5,000)
Net loss ................... ..................................... (258,713) (1,804)
----------- --------
Ending ..................... ..................................... $ (265,517) $ (6,804)
============ =========
Bingo.com Inc.
(formerly Progressive General Lumber Corp.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
as at
March 31, December 31,
1999 1998
unaudited (audited)
--------- ---------
Cash flows from operating activities:
Net loss ..................................................... $ (258,713) $ (1,804)
Adjustments to reconcile not loss to net cash
used in operating activities
Change in operating assets and liabilities: ..................
Accounts receivable ........................................ (15,340)
Prepaid expenses ........................................... (4,299) -
Accounts payable ............................................. (110,513) 159,404
Accrued liabilities ........................................ 4,179 -
------------------ ---------------
Net cash used In operating activities ................. (384,686) 157,600
------------------ ---------------
Cash flows from investing activities:
Software development ......................................... (62,340) -
Domain name rights ........................................... (200,000) -
Purchase equipment ........................................... (183,533) -
Security deposits ............................................ (18,192) -
------------------ ---------------
Net cash used in investing activities ................. (464,065) -
------------------ ---------------
Cash flows from financing activities:
Proceeds from issuance of common stock ....................... 1,075,000 -
------------------ ---------------
Share issuance costs ......................................... (8,643) -
------------------ ---------------
Net cash provided by financing activities .................. 1,066,357 -
------------------ ---------------
Net change in cash and cash equivalents ........................... 217,606 157,600
Cash and cash equivalents at beginning of period .................. 157,600 -
----------------
Cash and cash equivalents at end of period ........................ $ 375,206 $ 157,600
================= ===============
Supplemental disclosure of cash flow information:
Cash paid during the period for interest .......................... $ - $ -
Non cash investing and financing activities:
Issuance of common stock for domain name rights .............. $ 1,000,000 $ -
Allotment of common stock for software development ........... $ 500,000 $ -
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
BINGO.COM, INC.
Date: June 8, 1999
/s/ Darren Little
- -------------------------------------
Darren Little
President
Exhibit Number Description
- -------------- ------------------------------------------------------------
3.1 Articles of Incorporation of Progressive Lumber Corp.
effective January 12, 1987.
3.2 Articles of Amendment to Progressive Lumber Corp. filed on
July 17, 1998.
3.3 Articles of Amendment to Progressive Lumber Corp. effective
January 22, 1999.
3.4 Bylaws of Bingo.com, Inc.
10.1 Form of Stock Subscription Agreement dated December 1998.
10.2 Asset Purchase Agreement by and between Bingo, Inc. and
Progressive Lumber, Corp. dated January 18, 1999.
10.3 Escrow Agreement by and among Bingo.com, Inc., Bingo, Inc.
and Clark, Wilson dated January 27, 1999.
10.4 Registrant Name Change Agreement by and among Network
Solutions, Bingo, Inc. and Bingo.com, Inc. dated January
1999.
10.5* Lease Agreement by and between Harwood Corporation and
Bingo.com (Canada) Enterprises Inc. & 559262 B.C. Ltd.
commencing February 1, 1999.
10.6 Development Agreement by and between Stratford Internet
Technologies Inc. and Bingo.com, Inc. dated February 17,
1999.
10.7 Private Placement Subscription Agreement by and between
Bingo.com, Inc. and Dotcom Fund, S.A. dated February 11,
1999.
10.8 Share Purchase Warrant issued to Dotcom Fund, S.A. dated
February 12, 1999.
10.9* Application and Agreement for Merchant Services by and
between State Communications Ltd. and Global Payment
Services dated April 21, 1999.
10.10 Subscription Agreement by and between Bingo.com, Inc. and
Goldberg Equity Fund dated April 23, 1999.
10.11 Share Purchase Warrant issued to Goldberg Equity Fund dated
April 23, 1999.
10.12 Declaration of Trust made by Douglas Albert Lorne McLeod
dated May 1999.
21.1 List of Subsidiaries of Registrant
* To be filed by amendment